thats a very good question and I do not use it myself.
what it means is that if you set it on the kernel line....when you issue a normal reboot command within a booted system....it must go to the normal full cold start reboot...the one that goes to the bios screen.
but AFAIK this may be a kernel parameter that is obsolete....circa 2004.
2) can you open a shell and
and post the grub version please.
3) can you also run
strings /boot/grub/stage2 > strings.txt and check for any mention of reboot