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Yes, it's a compatibility issue. 4k sectors do not support MBR or legacy boot, which assumes a 512 byte boot sector. OVH just figures that a small opt-out performance penalty is better than the occasional user screaming that he's been ripped off because he can't boot into an MBR system.
For a VPS, I imagine there's no real way to know what the underlying physical disk uses, nor how the host has configured its system. 4k may be better in some situations but worse in others. In the case of a VPS, I only set 4k sectors for encrypted swap with something like this in my crypttab so it matches the page size:
At OVH, I was able to switch the secondary drives to 4K, and everything seems to be working fine.
However, when I tried to do the same on the primary drive (from rescue boot) and then rebooted to install the OS from the OVH template, it failed — the installation didn’t work and gave an error. I’m afraid you’re right that OVH has their system configured for 512-byte sectors on the initial/boot disk.
Instead of using the template, connect with VNC (if a VPS) or IPMI (if a dedicated server) and install the OS directly from the installation medium. Most Debian-based templates do not even use UEFI, which is necessary to have your root on a 4k drive.