It’s an interesting concept that I also started exploring last year, though somewhat less extreme.

My deployments run on incus containers/VMs which are spun up by terraform. Those may in turn host things e.g. through docker or just bare-metal.

But instead of going full packer-golden image, my principle orchestration is still done by Ansible which prepares the bare-metal host, gets incus rolling, and then starts the terraform process, before taking control again and operating on the now spun-up individual machines.