The need_hostname() function only sets
NEEDHOSTNAME if the hostname is set to
some default value like 'localhost'.

But in a setting such as PPP with dynamic
IP address assignment, you will often log
in and log out many times. The first time
you connect with ppp, ifup-post will set the hostname
to reflect your new ip address, but subsequent
ppp sessions will retain the old (now probably
incorrect) hostname.