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Verify with:
Engine: 4.0.2.4-0.1.el7ev
Host: 
OS Version:RHEL - 7.2 - 9.el7_2.1
Kernel Version:3.10.0 - 327.22.2.el7.x86_64
KVM Version:2.3.0 - 31.el7_2.21
LIBVIRT Version:libvirt-1.2.17-13.el7_2.5
VDSM Version:vdsm-4.18.5.1-1.el7ev

Steps: 
Check custom parameter 'custom_kernel_cmdline': 
1. Update via REST 
like: 
<os>
<custom_kernel_cmdline>intel_iommu=on kvm-intel.nested=1 vfio_iommu_type1.allow_unsafe_interrupts=1</custom_kernel_cmdline>
</os>
2. Check that parameter updated in REST and UI
3. Re-install host and check that parameter is pass to OS,
check in /var/log/ovirt-engine/host-deploy/<host_name_date>
like:
2016-08-10 10:42:27 DEBUG otopi.context context.dumpEnvironment:770 ENV KERNEL/cmdlineNew=str:'intel_iommu=on kvm-intel.nested=1 vfio_iommu_type1.allow_unsafe_interrupts=1'
--------------------------------------------------------
Check none custom parameter: reported_kernel_cmdline
1. Update reported_kernel_cmdline parameter and check that no error occur since
if read only parameter.
like 
<os>
<reported_kernel_cmdline>BOOT_IMAGE=/vmlinuz-3.10.0-327.22.2.el7.x86_64 root=/dev/mapper/vg0-lv_root ro rd.lvm.lv=vg0/lv_root crashkernel=auto rd.lvm.lv=vg0/lv_swap rhgb quiet LANG=en_US.UTF-8</reported_kernel_cmdline>
</os>

All checks PASS