> One problem I see is that now the update of a host is driven by the engine through playbooks and is not manually doable from the host itself as some time ago. And to have a container going through making modifications to the host where it is running doesn't seem a good idea

For an hosted-engine setup, does the engine VM modify the host it's running on then? And you need the VM abstraction to update the host safely? If so, I'm guessing running the engine directly on the node isn't safe either then.
Also, if the host/node itself gets updates though `dnf upgrade`, would it be possible to let dnf handle upgrades for it? and then rebuild/pull the latest container for engine updates? Or could the updates get out of sync of one another? 

Thanks!
Cameron