Rootless Container Image Unpacking Fails With EACCESS

I was trying to run rootless podman inside a podman + krun guest, but was unable to podman pull images. They would fail with:

Error: copying system image from manifest list: writing blob: adding layer with blob "sha256:55afa1ecc21d2bb5e5045f32dafee56272ffd89860bac26f6c32123439af26a4"/""/"sha256:34884abbe92863fce933ed7c39c0e045631af0ed86d5cc0dfbdf9fdca426ce3c": unpacking failed (error: exit status 1; output: setting up pivot dir: mkdir ./.pivot_root4119440341: permission denied

With EACCESS; from strace:

[pid  1373] mkdirat(AT_FDCWD, "/home/nlordell/.local/share/containers/storage/overlay/34884abbe92863fce933ed7c39c0e045631af0ed86d5cc0dfbdf9fdca426ce3c/diff", 0555) = 0
...
[pid  1378] mkdirat(AT_FDCWD, "./.pivot_root1142747937", 0700) = -1 EACCES (Permission denied)

A minimal reproducer assuming podman and crun-krun on the host:

podman run --runtime=krun -it --rm debian:13 bash -c "
apt-get update && apt-get install -y podman
podman pull alpine                     # works
useradd -m -U myuser
su -c 'podman pull alpine' - myuser    # fails
"

It appears to be an issue with using a podman graph-root on a virtiofs filesystem as an unprivileged user. If I use, for example, --root /dev/shm/... (which is tmpfs) then everything works.

As a workaround, I was able to loop-mount a disk image in the container itself to get podman to work:

sudo truncate -s 20G /var/lib/podman-storage.img
sudo mkfs.ext4 /var/lib/podman-storage.img
sudo mkdir -p /mnt/podman-storage
sudo mount -o loop /var/lib/podman-storage.img /mnt/podman-storage
sudo install -d -o myuser -g myuser /mnt/podman-storage/container
podman pull --root /mnt/podman-storage/container alpine

In chatting with an LLM, it told be very confidently that:

The overlay and vfs drivers create the layer's diff directory mode 0555 and rely on CAP_DAC_OVERRIDE to write into it. Capabilities are not part of the FUSE protocol — a request carries only uid/gid — so the FUSE server re-evaluates the DAC check as the unprivileged uid and denies the write.

But do not have the know-how or understanding to evaluate whether or not it is accurate. Including it here in case it helps narrow down the issue. I am also not sure whether or not this is actually a libkrun issue, and I really don't have much understanding about how the whole podman, crun, libkrun interact, but looking through the issues in this repo it felt like it was a reasonable place to report it (as it appears to be a virtiofs related issue). Please let me know if I should move this issue elsewhere.