The parsing of options and conffile is fixed in recent grml-live versions. Demo:

# grep OUTPUT /etc/grml/grml-live.local
OUTPUT="/srv/grml-live"
# grep OUTPUT /etc/grml/grml-live.conf 
OUTPUT="/grml/grml-live"

# grml-live -o /srv/foooo
[...]
  main directory:    /srv/foooo
  chroot target:     /srv/foooo/grml_chroot
  build target:      /srv/foooo/grml_cd
  ISO target:        /srv/foooo/grml_isos

So cmdline wins over grml-live.local which wins over grml-live.conf which wins 
over defaults. :) Should do what users expect. Closing this bugreport therefore.