Currently it is not possible to configure system VMs to use local storage on a per zone basis. Since it is a global config (system.vm.use.local.storage), either it is enabled for all zones or none. The idea is to make it a zone level config. The current zone level setting of 'enabling local storage for user VMs' won't be impacted. Now there will be an additional setting for system VMs as well.
I will create a tracking bug and FS for this. Comments? Thanks, Koushik