diff --git a/pkg/controller/kubelet-config/helpers.go b/pkg/controller/kubelet-config/helpers.go
index 50c0c597ab..3550438c9a 100644
--- a/pkg/controller/kubelet-config/helpers.go
+++ b/pkg/controller/kubelet-config/helpers.go
@@ -42,7 +42,7 @@ func createNewKubeletDynamicSystemReservedIgnition(autoSystemReserved *bool, use
 	var systemReservedEphemeralStorage string
 
 	if autoSystemReserved == nil {
-		autoNodeSizing = "false"
+		autoNodeSizing = "true"
 	} else {
 		autoNodeSizing = strconv.FormatBool(*autoSystemReserved)
 	}
@@ -68,7 +68,7 @@ func createNewKubeletDynamicSystemReservedIgnition(autoSystemReserved *bool, use
 	config := fmt.Sprintf("NODE_SIZING_ENABLED=%s\nSYSTEM_RESERVED_MEMORY=%s\nSYSTEM_RESERVED_CPU=%s\nSYSTEM_RESERVED_ES=%s\n",
 		autoNodeSizing, systemReservedMemory, systemReservedCPU, systemReservedEphemeralStorage)
 
-	r := ctrlcommon.NewIgnFileBytesOverwriting("/etc/node-sizing-enabled.env", []byte(config))
+	r := ctrlcommon.NewIgnFileBytesOverwriting("/etc/auto-node-sizing-enabled.env", []byte(config))
 	return &r
 }
 
@@ -461,6 +461,7 @@ func kubeletConfigToIgnFile(cfg *kubeletconfigv1beta1.KubeletConfiguration) (*ig
 
 // generateKubeletIgnFiles generates the Ignition files from the kubelet config
 func generateKubeletIgnFiles(kubeletConfig *mcfgv1.KubeletConfig, originalKubeConfig *kubeletconfigv1beta1.KubeletConfiguration) (*ign3types.File, *ign3types.File, *ign3types.File, error) {
+	klog.Infof("generateKubeletIgnFiles: starting for KubeletConfig %s", kubeletConfig.Name)
 	var (
 		kubeletIgnition            *ign3types.File
 		logLevelIgnition           *ign3types.File
@@ -469,6 +470,7 @@ func generateKubeletIgnFiles(kubeletConfig *mcfgv1.KubeletConfig, originalKubeCo
 	userDefinedSystemReserved := make(map[string]string)
 
 	if kubeletConfig.Spec.KubeletConfig != nil && kubeletConfig.Spec.KubeletConfig.Raw != nil {
+		klog.Infof("generateKubeletIgnFiles: KubeletConfig %s has custom kubelet config, decoding", kubeletConfig.Name)
 		specKubeletConfig, err := DecodeKubeletConfig(kubeletConfig.Spec.KubeletConfig.Raw)
 		if err != nil {
 			return nil, nil, nil, fmt.Errorf("could not deserialize the new Kubelet config: %w", err)
@@ -477,16 +479,19 @@ func generateKubeletIgnFiles(kubeletConfig *mcfgv1.KubeletConfig, originalKubeCo
 		if val, ok := specKubeletConfig.SystemReserved["memory"]; ok {
 			userDefinedSystemReserved["memory"] = val
 			delete(specKubeletConfig.SystemReserved, "memory")
+			klog.Infof("generateKubeletIgnFiles: KubeletConfig %s has user-defined systemReserved memory: %s", kubeletConfig.Name, val)
 		}
 
 		if val, ok := specKubeletConfig.SystemReserved["cpu"]; ok {
 			userDefinedSystemReserved["cpu"] = val
 			delete(specKubeletConfig.SystemReserved, "cpu")
+			klog.Infof("generateKubeletIgnFiles: KubeletConfig %s has user-defined systemReserved cpu: %s", kubeletConfig.Name, val)
 		}
 
 		if val, ok := specKubeletConfig.SystemReserved["ephemeral-storage"]; ok {
 			userDefinedSystemReserved["ephemeral-storage"] = val
 			delete(specKubeletConfig.SystemReserved, "ephemeral-storage")
+			klog.Infof("generateKubeletIgnFiles: KubeletConfig %s has user-defined systemReserved ephemeral-storage: %s", kubeletConfig.Name, val)
 		}
 
 		// FeatureGates must be set from the FeatureGate.
@@ -502,6 +507,7 @@ func generateKubeletIgnFiles(kubeletConfig *mcfgv1.KubeletConfig, originalKubeCo
 			originalKubeConfig.ProtectKernelDefaults = false
 		}
 		// Merge the Old and New
+		klog.Infof("generateKubeletIgnFiles: merging custom kubelet config for KubeletConfig %s", kubeletConfig.Name)
 		err = mergo.Merge(originalKubeConfig, specKubeletConfig, mergo.WithOverride)
 		if err != nil {
 			return nil, nil, nil, fmt.Errorf("could not merge original config and new config: %w", err)
@@ -509,20 +515,25 @@ func generateKubeletIgnFiles(kubeletConfig *mcfgv1.KubeletConfig, originalKubeCo
 	}
 
 	// Encode the new config into an Ignition File
+	klog.Infof("generateKubeletIgnFiles: encoding kubelet config to ignition file for KubeletConfig %s", kubeletConfig.Name)
 	kubeletIgnition, err := kubeletConfigToIgnFile(originalKubeConfig)
 	if err != nil {
 		return nil, nil, nil, fmt.Errorf("could not encode JSON: %w", err)
 	}
 
 	if kubeletConfig.Spec.LogLevel != nil {
+		klog.Infof("generateKubeletIgnFiles: creating log level ignition for KubeletConfig %s with level %d", kubeletConfig.Name, *kubeletConfig.Spec.LogLevel)
 		logLevelIgnition = createNewKubeletLogLevelIgnition(*kubeletConfig.Spec.LogLevel)
 	}
 	if kubeletConfig.Spec.AutoSizingReserved != nil && len(userDefinedSystemReserved) == 0 {
+		klog.Infof("KubeletConfig %s: autoSizingReserved is set to %t", kubeletConfig.Name, *kubeletConfig.Spec.AutoSizingReserved)
 		autoSizingReservedIgnition = createNewKubeletDynamicSystemReservedIgnition(kubeletConfig.Spec.AutoSizingReserved, userDefinedSystemReserved)
-	}
-	if len(userDefinedSystemReserved) > 0 {
+	} else if len(userDefinedSystemReserved) > 0 {
+		klog.Infof("KubeletConfig %s: using user-defined systemReserved values: %v", kubeletConfig.Name, userDefinedSystemReserved)
 		autoSizingReservedIgnition = createNewKubeletDynamicSystemReservedIgnition(nil, userDefinedSystemReserved)
 	}
 
+	klog.Infof("generateKubeletIgnFiles: completed for KubeletConfig %s (kubeletIgnition=%v, logLevelIgnition=%v, autoSizingReservedIgnition=%v)",
+		kubeletConfig.Name, kubeletIgnition != nil, logLevelIgnition != nil, autoSizingReservedIgnition != nil)
 	return kubeletIgnition, logLevelIgnition, autoSizingReservedIgnition, nil
 }
diff --git a/pkg/daemon/update.go b/pkg/daemon/update.go
index e7c91edcd3..b03bff4569 100644
--- a/pkg/daemon/update.go
+++ b/pkg/daemon/update.go
@@ -1863,27 +1863,30 @@ func (dn *Daemon) deleteStaleData(oldIgnConfig, newIgnConfig ign3types.Config) e
 		newFileSet[f.Path] = struct{}{}
 	}
 
-	// need to skip these on upgrade if they are in a MC, or else we will remove all certs!
-	certsToSkip := []string{
+	// need to skip these on upgrade if they are in a MC,
+	// or else we will remove all certs!
+	// also required to ensure that clusters with node sizing disabled are not affected
+	filesToSkip := []string{
 		userCABundleFilePath,
 		caBundleFilePath,
 		cloudCABundleFilePath,
+		"/etc/node-sizing-enabled.env",
 	}
 	for _, f := range oldIgnConfig.Storage.Files {
 		if _, ok := newFileSet[f.Path]; ok {
 			continue
 		}
-		skipBecauseCert := false
-		for _, cert := range certsToSkip {
-			if cert == f.Path {
-				skipBecauseCert = true
+		mustSkip := false
+		for _, fileToSkip := range filesToSkip {
+			if fileToSkip == f.Path {
+				mustSkip = true
 				break
 			}
 		}
 		if strings.Contains(filepath.Dir(f.Path), imageCAFilePath) {
-			skipBecauseCert = true
+			mustSkip = true
 		}
-		if skipBecauseCert {
+		if mustSkip {
 			continue
 		}
 		if _, err := os.Stat(noOrigFileStampName(f.Path)); err == nil {
diff --git a/pkg/operator/sync_test.go b/pkg/operator/sync_test.go
index 158f262c38..c69e7fd6ce 100644
--- a/pkg/operator/sync_test.go
+++ b/pkg/operator/sync_test.go
@@ -402,4 +402,4 @@ func buildMachineConfigurationWithBootImageUpdateEnabled() *opv1.MachineConfigur
 
 func buildMachineConfigurationWithNoBootImageConfiguration() *opv1.MachineConfiguration {
 	return &opv1.MachineConfiguration{Spec: opv1.MachineConfigurationSpec{ManagedBootImages: apihelpers.GetManagedBootImagesWithNoConfiguration()}, ObjectMeta: metav1.ObjectMeta{Name: "cluster"}}
-}
+}
\ No newline at end of file
diff --git a/templates/common/_base/files/kubelet-auto-node-sizing-enabled.yaml b/templates/common/_base/files/kubelet-auto-node-sizing-enabled.yaml
index d1c72a540f..1d9a1ba5cc 100644
--- a/templates/common/_base/files/kubelet-auto-node-sizing-enabled.yaml
+++ b/templates/common/_base/files/kubelet-auto-node-sizing-enabled.yaml
@@ -1,8 +1,8 @@
 mode: 0644
-path: "/etc/node-sizing-enabled.env"
+path: "/etc/auto-node-sizing-enabled.env"
 contents:
   inline: |
-    NODE_SIZING_ENABLED=false
+    NODE_SIZING_ENABLED=true
     SYSTEM_RESERVED_MEMORY=1Gi
     SYSTEM_RESERVED_CPU=500m
     SYSTEM_RESERVED_ES=1Gi
\ No newline at end of file
diff --git a/templates/common/_base/units/kubelet-auto-node-size.service.yaml b/templates/common/_base/units/kubelet-auto-node-size.service.yaml
index 4c5dd79072..e48f611ce9 100644
--- a/templates/common/_base/units/kubelet-auto-node-size.service.yaml
+++ b/templates/common/_base/units/kubelet-auto-node-size.service.yaml
@@ -11,7 +11,8 @@ contents: |
   # Need oneshot to delay kubelet
   Type=oneshot
   RemainAfterExit=yes
-  EnvironmentFile=/etc/node-sizing-enabled.env
+  EnvironmentFile=/etc/auto-node-sizing-enabled.env
+  EnvironmentFile=-/etc/node-sizing-enabled.env
   ExecStart=/bin/bash /usr/local/sbin/dynamic-system-reserved-calc.sh ${NODE_SIZING_ENABLED} ${SYSTEM_RESERVED_MEMORY} ${SYSTEM_RESERVED_CPU} ${SYSTEM_RESERVED_ES}
   [Install]
   RequiredBy=kubelet-dependencies.target