I think from what I’ve read that this is the case, but I’ve read some other info that’s made it less clear to me.
On the second part of the question regarding container engines, I’m pretty sure that may also be correct, and it kinda makes me wonder a little about risks of engine lock-in, but that may be a little out of scope.
WSL1 worked this way, but this approach has many drawbacks (e.g. FS operations are slower on Windows, which can have massive impacts on Linux application performance).
Since WSL2 they switched to a VM approach - Windows and a specialized Linux are both running under a hypervisor next to each other.