What sets the system name in system/local/inputs.conf?

[cmeo]

It's all in the title. You can configure the system name in server.conf via Manager, but what sets the one in inputs.conf?

[Drainy]

do you mean the host field?

[monitor://blah]
host = HOSTNAME

If you don't define this then it will use the host IP.
See;
http://docs.splunk.com/Documentation/Splunk/latest/Admin/Inputsconf
for more details