Indeed, ubiquity doesn't bother with checking the DHCP host name.
Perhaps it should -- that would be a bug in ubiquity. This is possibly
why you can't replicate the issue on virtual machines, in this case are
you using the alternate installer?

Regardless, it's not really supported to remove /etc/hostname. The file
should instead be modified if the hostname for the system changes, along
with /etc/hosts (since it contains a "pointer" to 127.0.1.1 for that
name). At the same time, if lightdm fails to find the hostname (which is
"normal" if it's just looking for it in /etc/hostname), it's behaving
correctly in showing "localhost". What *is* broken is that the desktop
doesn't continue to load cleanly and instead falls back to the greeter.

There needs to be some more investigation at the lightdm level for this;
for the reasons listed by Sebastien.

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https://bugs.launchpad.net/bugs/1007221

Title:
  Removing /etc/hostname results in failed first login attempt

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