If you use the non LTS branch of incus it supports OCI containers. Have you tried that instead of running docker inside of a LXC container?
Within the incus dev environment container though I'm pretty sure I want to keep docker, as I have a lot of tooling that expects it for better or worse (docker compose especially). It also doesn't appear incus integrates buildkit etc. so even if I used it here, I'd still need something else to _build_ OCI images.