They're doing this so you (or other shared tenants) can't read your VMs or the host's memory (and vice versa).
What about on dedicated servers ? Is there a config that can be done ?
No, and that's not the way the bug works.
They're rebooting to patch the host, not your VM.
This is necessary because AWS does not support hot-migration of clients. To reboot the host, instead of pushing clients off to other hosts, they have to reboot all clients with the host.