Yes, but there are strict SELinux policies forbidding you from accessing certain "dangerous" stuff like execve(), which may end up killing native terminal emulators like Termux (despite Android not forbidding dynamic code execution elsewhere, Play Store policies aside).
Sure, and this VM solution is the exact path forward for “install stuff in a box” solutions as Android move towards trying to enforce w^x, which is probably why they chose a full Linux VM as their demo app. Emulators and games and apps with embedded JIT will be harder to deal with.