WSL2 uses a full Linux VM running under HyperV.

WSL2 can get weird when you start trying to install software with low level virtualization and file system features. YMMV. I’d use it to install apps, but I wouldn’t be confident it’d work with Docker. Even if it did initially work, eventually you’ll hit a problem for which there is no googleable answer & good luck with that.

Docker Desktop installs dockerd in a WSL2 instance these days instead of using VirtualBox so I'd assume it works pretty well now.

Current Docker on Windows detects if you have WSL2 or not, and gives you the option of just installing docker in WSL2 + configuring the Windows docker tools to manipulate the docker daemon running in WSL2.

But what does it run as PID1? I think not systemd?

Last I recall, docker desktop on windows explicitly recommended WSL2 over Hyper-V or whatever based setups.