Pihole be the DNS server in the whole network?

If I understand what you are asking:

clients – (green) → IPFire – (red) → PiHole → Internet

PiHole is not the most secure device. The IPFire is much more secure since it is a hardened firewall.

So I would not configure things this way. And I would strongly recommend not to have PiHole connected to red (the Internet).

This is what I have:
Client (DNS) → PiHole (DNS) → IPFire (DNS) → to external DNS Server

See this post:

EDIT:

And this is what I did to connect GREEN and BLUE to PiHole.

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