I mean yes, you are sacrificing some RAM. But a typical Linux OS to run VMs/containers could fit in a couple gigs. For the amount of RAM these servers have, this is peanuts and would save a lot of headaches dealing with statefulness.
We run a thin base OS on the boxes and then VMs on top which we consider more ephemeral. The frequency of needing to update that base OS is v. low.
I think there's a case for building a custom PXE booted RAMdisk image to replace the install though; something like what Equinix Metal (formerly Packet) do with Tinkerbell (https://github.com/tinkerbell); they call it an OS Install Environment, but the idea is a small lightweight linux install agent that can DD a golden image onto the disk (vs. an install each time).