Cloudflare has an entry in their system that $hostname is to be routed to service $foo.

I imagine you also have an entry in your domain name table that says I want $hostname to go to $bar. But that probably has lower priority that the list of rules that route traffic internally.

So again, nothing to do with DNS. The server that services a web request doesn't know anything about how DNS resolution worked. It just knows it has a request for a hostname, and that it arrived at a particular IP address.