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Alternatively, many the rules are operating system aware. If a RHEL7-focused check is enabled in the RHV profile, and the underlying host is RHEL 8-based, will the evaluation results showup as "notapplicable" with proper CPE usage?

Well, yes. But we don't label the rules with CPE for product specific versions.
There is 'prodtype' used to label the rules, but it is used to decide whether to include the rule in the DS. It is not used in any way for Rule applicability with CPE.
I would just add that proper support of CPE Applicability Language within the project's build system is required to handle this in a scalable manner. At this moment, a large amount of rules in the project uses various workarounds to achieve this behavior. Implementation of CPE AL is a necessary condition for the project's growth, and it is a feature with one of the highest priorities in our tech debt reduction wishlist, and we see this as a confirmation of our earlier conclusions.