The documentation in this case is wrong. All variables in /etc/default/grub start with GRUB_, so it's GRUB_DEFAULT=saved, not DEFAULT=saved. I've corrected the Ubuntu wiki to reflect that.

The official grub manual describes this correctly: http://www.gnu.org/software/grub/manual/grub.html#Simple-configuration

Put the following in /etc/default/grub:

GRUB_DEFAULT=saved
GRUB_SAVEDEFAULT=true

Then run:

sudo update-grub

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