Ran into this problem on 18.04 server as well.

Removing the overriding line in /etc/default/grub.d/50-curtin-
settings.cfg works around it for now.

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https://bugs.launchpad.net/bugs/1569567

Title:
  Running update-grub does not update /boot/grub/grub.cfg with
  GRUB_CMDLINE_LINUX_DEFAULT from /etc/default/grub

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