A subdomain was created accidentally (when really they were just trying to make a standard host record) due to the employee putting a period instead of a dash on the second record they were creating.
For example, the goal was to create the records x.domain.com and y-x.domain.com. but instead a subdomain of x was created due to them creating y.x.domain.com.
Now when trying to recreate the host record (x.domain.com) DNS refuses to build it as a host record and will only rebuild it as a subdomain.
I have found a couple of similar issues, but unfortunately nobody has a fix.
Here are the other posts i found that describe the same issue: http://serverfault.com/questions/727765/unable-to-fully-remove-windows-dns-subdomain
Any help is appreciated!
EDIT: Finally got this sorted out. For one, the DNS zone transfer configs were all messed up. I'm pretty sure that was a site specific one, but it's worth checking if you run into this. Be sure that your name server list is correct/up-to-date and be sure you are using the option on the zone transfer tab to replicate to the name server list. We then somehow lucked into finding a particular DC that was having slow replication issues. We isolated that DC, forced a replication from a known good DC to make sure it was clean. rebooted it, then turned the replication schema into more of a hub spoke config than it having access to all of the other DCs. verified that it was taking the proper entries and waited for replication. We then saw a couple other DCs start to have the weird subdomain issue but running a reload (NOT refresh) on the server level in the DNS console snapped everything back into place. Good luck if you run into this!