Comment 1 for bug 768296

You are correct that setting hostname in cloud-config does not update /etc/hosts.
The value that you set in cloud-config should be correctly written to '/etc/hostname' (by cc_set_hostname).

If you also set 'manage_etc_hosts: True' then your hostname will also be written to /etc/hosts.

So, to do what you want:
#cloud-config
manage_etc_hosts: True
hostname: my-hostname-here

Do you think that is acceptable ?

I'm marking this as "Incomplete", please comment back and either move it to 'New' or 'Invalid' (or whatever state you might think is best).