Yeah, I understand this and said it correctly in my post. We need nested virtualization to run WSL2 inside a VM: this is a Linux VM inside a Windows VM inside a Windows host. WSL2 is already a VM, so if you want to run that inside a VM, it requires nested virtualization. Nested virtualization is one of those features that people don't know about unless they need it, and they find out for the first time when they get an error message from Hyper-V. If you have a development VM on a system without nested virtualization, you're stuck with WSL1 inside that VM, or using a "sibling" Linux VM that you set up manually (the latter was my actual solution to this issue).