It's a practical approach, I used vagrant many years ago mostly successfully. I also explored the docker-in-docker situation recently while working on my own agentic devcontainer[0]- the tradeoffs are quite serious if you are building a secure sandbox! Data exfil is what worries me most, so I spent quite some time figuring out a decent self-contained interactive firewall. From a DX perspective, devcontainer-integrated IDEs are quite a convenient workflow, though docker has its frustrating behaviours

[0]: https://github.com/replete/agentic-devcontainer