I have the same problem! Whenever I connect to my LT2P IPSEC VPN without routing all traffic over VPN (just internal IP network traffic), Little Snitch stops to resolve hostnames and starts promopting me to create new rules based on IPs only.
This problem is ONLY when connecting to the VPN without routing all traffic over it. The system itself and other application are able to properly reverse resolve IPs to hostnames, just Little Snitch has a problem. I have even tried uninstalling LittleSnitched and tested with the 'competition' software, which works to resolve hostnames for rules with the VPN connected. I love LittleSnitch but find it impossible to work when the VPN is on because it keeps bugging me to make new rules about rules which I already have but don't work since they are hostname based!
I've even submitted a bug report about this!
This problem is ONLY when connecting to the VPN without routing all traffic over it. The system itself and other application are able to properly reverse resolve IPs to hostnames, just Little Snitch has a problem. I have even tried uninstalling LittleSnitched and tested with the 'competition' software, which works to resolve hostnames for rules with the VPN connected. I love LittleSnitch but find it impossible to work when the VPN is on because it keeps bugging me to make new rules about rules which I already have but don't work since they are hostname based!
I've even submitted a bug report about this!