I'm surprised they're not following Microsoft WSL2 and taking the virtualization approach. Ultimately the virtualization approach has better performance (fewer context switches) and much better compatibility. AFAICT one of the big reasons Microsoft gave up on WSL1 is that it's an infinite amount of work to reimplement all Linux kernel features. People kept running into obscure Linux features that were not supported.
Yes, virtualized Linux is somewhat less well-integrated, e.g. at the filesystem level, but that is getting better with tools like https://virtio-fs.gitlab.io. Most importantly, it's path that others are also taking, so you can share their work. This Fuschia-specific approach won't benefit from anyone else's work.
They even mention that they're going to support virtualized Linux as well, so here they're just proposing to do a lot of extra work.
I guess Google doesn't have to care how much extra work they create for themselves.