Hello Daniel
I tried labbing this one up, and I have found that the ip default-network command doesn’t quite work very well. I was able to configure it, but I, too, could not get the exterior flag set. I have since done some research and found that it is somewhat tricky to get it to work and to “cooperate” with routing protocols. For one thing, it only works for classful networks. In particular, this Cisco documentation states that:
The
ip default-networkcommand is classful, this means that if the router has a route to the subnet indicated by this command, it installs the route to the major network. At this point neither network has been flagged as the default route. Theip default-networkcommand must be run again, this time with the use of the major network in order to flag the candidate as a default route.
It seems that this command is quite old and has been deprecated. Additional information can be found here:
So it seems that it’s not an issue of the use of a loopback interface, but the operation of the command itself.
I hope this has been helpful!
Laz