Figma has a great blog post on some different user-generated javascript isolation approaches [1]. They discuss this iframe approach, running a webassembly javascript interpreter (also suggested in these thread comments), and using javascript realms. In the post they originally opted for javascript realms but there's an edit at the top - it seems like they ended up switching to the webassembly javascript interpreter approach.

[1]: https://www.figma.com/blog/how-we-built-the-figma-plugin-sys...