Still struggling a bit with getting spawned vehicles to register on the server and not kill user on entry. Its my understanding that commands stored in setVehicleInit are executed over the network rather than locally when processInitCommands is called, so I tried spawning a vehicle using that with the following code with the hope that since its sent over the network and not locally the server will recognize the vehicle as being valid:
playa = name (vehicle player);
publicVariable "playa";
init="if (name (vehicle player) == playa) then {_obj = createVehicle['M1030', getPos player, [], 0, 'CAN_COLLIDE']; _obj setVariable ['ObjectID', 654132, true];};";
publicVariable "init";
player setVehicleInit init;sleep 0.1;hintsilent "";processInitCommands;sleep 0.1;hintsilent "";clearVehicleInit player;
I'm able to spawn a vehicle this way, but I still die on entry. Is this because this code is somehow executing only locally still even though setvehicleinit commands are sent over the network? or is there some variable somewhere i'm forgetting to set that the server is checking for? Is this not a proper method for executing code remotely? 
I use this to fix it (I know its not the proper way but it works).
Look at the vehicle then run this script and you can drive the vehicle safely.
_veh = cursorTarget;
hint format ["%1", _veh];
_veh setVariable ["ObjectID", 1337, true];
dayzSetFuel = [_veh,1];
dayzSetFuel spawn local_sefFuel;
_veh setDamage 0;
Hmm, I tried spawning a vehicle just now with the code
_location = (position player);
_className = "Tractor";
_vehi = createVehicle [_className, _location, [], 0, "CAN_COLLIDE"];
_vehi setVariable ["ObjectID", 1557, true];
_vehi setdammage 0;
_vehi setfuel 1;
dayzSetFuel = [_vehi,1];
dayzSetFuel spawn "\z\addons\dayz_code\compile\local_setFuel.sqf";
Which is essentially the same thing your doing there, and it still exploded when I got in it. Also, I glanced at local_setFuel's code...and all it does is call setFuel on the vehicle, which I have been doing already anyway, so I don't think this is the solution unless I'm doing something wrong. Are you sure there isn't something else responsible in your code for making vehicles work? This doesn't seem like it would be it :S