Is it being overwritten by the next_server directive in /etc/cobbler/settings? Here is how we get around that. Assuming you have a dns zone for every subnet you also do dhcp for, add a dns A or CNAME record from the name cobbler to whatever place it should be. Stuff like that allows us to cheat and use the same settings file everywhere. You could also just edit the template to not include the next-server line for each system record. It should be /etc/cobbler/dhcp.template. Does that work for you?
## Cobbler defaults to $next_server, but some users ## like to use $iface.system.server for proxied setups ## next-server $iface.next_server;
hmm - actually no as i kinda need the next_server to be in the dhcp config just like the option routers etc ??