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I am looking at proxmox to create the VMs, of which I am considering dietpi.
Note, I am addicted to docker, and whilst I would love to run a bunch of containers within LXC, from my research, it is problematic and unfortunately I don't have time at the moment to learn the intricacies of LXC <> docker.
I like the idea of LXC minimal OS.
Oh okay I get what you mean now.
If your Proxmox machine is not stingent in resources (e.g. storage, memory, etc), I would recommend sticking to distros you find more familiar with. Popular distros such as Debian, Ubuntu, and Arch are also fine. I don't think the overhead is that pronounced.
I have been running docker in LXC (Ubuntu server 22.04 image for the LXC + Official Docker installation, i.e. not Snap) and so far I have not encountered any roadblock from the intricacies between LXC and Docker. Usually they are from within the docker images and the embedded networks. But I am not centralizing all Docker affairs into one LXC. I split them by services. So your mileage may vary.