There is a ton of bug reports regarding the Network-Manager’s nm-applet not properly configuring static ips. There are, and always have been, bugs in the nm-applet, in each of its versions. In short, getting a static ip with dhcp assigned DNS parameters requires editing the /etc/dhcp3/dhclient.conf file. Here we go.

1. sudo vi /etc/dhcp3/dhclient.conf

   >>
   alias {
     interface "eth0";
     fixed-address 192.168.1.101;
     option subnet-mask 255.255.255.255;
   }
   <<

2. sudo dhclient -r
3. sudo dhclient

EDIT FOR Ubuntu Server 11.04 (Reference)

$ sudo vi /etc/network/interfaces
Append the following configuration:

auto eth0:0
iface eth0:0 inet static
address 192.168.1.101
netmask 255.255.255.0
broadcast 192.168.1.255
network 192.168.1.0

$ sudo /etc/init.d/networking restart