Win11 + WSL2 Nested Virtualization Error

I just created a Win11 VM and trying to use WSL2 within it.

It's my understanding WSL2 uses a real Linux kernel running under Hyper-V (whereas WSL1 was more of a translation layer; like the inverse of WINE).

When I launch it, it seems to be working but I get this error in my terminal:

wsl: Nested virtualization is not supported on this machine.

It seems to be working under WSL 2 though.

PS C:\Users\eric> wsl --list -v
  NAME    STATE           VERSION
* ub24    Running         2

What do I need to do to get rid of this message?

Things I've tried

These were mainly from Google's Gemini AI.

On the Unraid host I verified I got a 1 returned from cat /sys/module/kvm_amd/parameters/nested

I've enabled Hyper-V on the Windows guest.

On the Unraid VM xml

• I've added within <cpu> section: <feature policy='require' name='vmx'/> , then later switched vmx to svm

• I've added within <features> section: <kvm><hidden state='on'/></kvm>

• Verified that <cpu> had mode='host-passthrough' set.

On the Windows VM I've created a .wslconfig file in my home directory with the following contents.

[wsl2]
nestedVirtualization=true