Hey @sean.liew, good analysis of the issue! While I don't have all the past context for why this is the way it is, it seems to be the same root cause as the Docker bind-mount scenario discussed here - the volume mount masks the clean template files.
The official Ignition Helm Chart handles this exact scenario in Kubernetes using an init container to seed the persistent volume before the main container starts. This is the Kubernetes-native pattern we recommend. You can see the specific implementation here in the StatefulSet template.
If you're building custom manifests and your symlink workaround is working well, that's a valid solution. Otherwise, the Helm chart handles this for you automatically.