unbound/nsd returning SERVFAIL resolving local LAN DNS. nsd alone works fine

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This line from the log indicates the problem:

Jun 15 06:12:39 pizza.yoderdev.com unbound[1947]: [1947:0] debug: skip addr on the donotquery list ip4 127.0.0.1 port 53530 (len 1

Unbound by default refuses to send any DNS queries to localhost. To enable it to query localhost, set the do-not-query-localhost to no in the server-section of the Unbound configuration:

server:
  interface: 127.0.0.1
  interface: 192.168.1.50
  [...]
  do-not-query-localhost: no

See the documentation for unbound.conf for a description of the option.

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