M1 Docker still needs a Linux VM, Virtualization Framework is just a different way of doing that. I'm not aware of any VM that can share memory with the host, but maybe Apple has some black magic up their sleeve.
Yeah, fundamentally Docker is Linux on Linux. If you are running Linux on MacOS, it's not Docker, it's a VM. So Docker installs are Linux Docker Image -> Linux VM -> MacOS Virtualization Framework.
For that reason alone, I suspect Linux will always be the best host system for Docker images.
Seems like Apple's Virtualization Framework supports some sort of memory ballooning mechanism (https://developer.apple.com/documentation/virtualization/mem...), which could hopefully enables in the near future dynamic memory support like Docker Desktop on WSL 2 is able to do (if it's not already the case, I haven't tried the M1 preview).
For that reason alone, I suspect Linux will always be the best host system for Docker images.