We use KVM and your milage will vary with nested virtualization. On older Droplets, kernels have been managed outside of the Droplets themselves inside the control panel. See this article for more information. In order to adjust kernel parameters for these Droplets, you will need to open a support ticket.

With Ubuntu 16.04, we have changed this behaviour and now Droplets will use their internal kernel allowing you to adjust parameters by editing your Grub configuration as normal. We are planning on bringing these changes to earlier releases, but for the time being going with Ubuntu 16.04 is your best bet if you need to enable non-default kernel options.