Change the order the setup cache is used to update things, such that the example/playbooks/conditional_part1.yml file

works as advertised

lib/ansible/runner/__init__.py

@@ -448,9 +448,10 @@ class Runner(object):
         host_variables = self.inventory.get_variables(host)
         port = host_variables.get('ansible_ssh_port', self.remote_port)
 
-        inject = self.setup_cache[host].copy()
+        inject = {}
         inject.update(host_variables)
         inject.update(self.module_vars)
+        inject.update(self.setup_cache[host])
         inject['hostvars'] = self.setup_cache
 
         # allow with_items to work in playbooks...