Adding wildcards to /etc/hosts is not possible but, also required in our case. However, this is how to go about it:
cp /usr/share/doc/dnsmasq-base/examples/dnsmasq.conf.example /usr/local/etc/dnsmasq.conf
then, edit your /usr/local/etc/dnsmasq.conf and add:
~$ sudo ./usr/local/sbin/dnsmasq
Further, instead of using Zend_Controller_Router_Hostname use Zend_Controller_Router_Route_Hostname
Go through the document and you should be OK!
$toRoute = new Zend_Controller_Router_Route_Hostname( ':language.mysite.local', array( 'controller' => 'index', 'action' => 'index', 'language' => 'pl') ) );
PS: Don't forget to mention nameserver as 127.0.0.1 in /etc/resolv.conf . At times, restarting system helps!
Enjoy coding! :)