Comment 2 for bug 1418966

I think Michael is correct - since /etc/hostname is mounted from /etc/writable, if you do the following, you'll see the original version of the file:

$ cat /etc/hostname
foo
$ sudo umount /etc/writable
$ cat /etc/hostname
localhost.localdomain

One solution would be to have a systemd unit reset the hostname after processing the fstab entries (or delay hostnamed from starting until all the mounts have completed).