It's not clear how what you're saying relates to nested hypervisors, but I don't think anyone does serverless on nested hypervisors. AWS Lambda uses MicroVMs which to my knowledge are not nested.
Your typical open source "serverless" systems that run on Kubernetes has a security story that's "trusted code only". If your application involves routinely running hostile code e.g. something like Cloudflare Workers. Your usual put-it-in-a-container story just won't cut it. You need on-demand, rapidly deployed containers, that is capable of providing VM level of security and isolation with the spawn time and resource consumption of a container. This isn't new technology, AWS, Google etc. have had some variant of it from day 1. Heroku and a lot of the secondary PaaS all run on the big players' underneath, they don't do it themselves. It is only recently that the technologies involved were open sourced and standardized.
Oh I view typical serverless systems as AWS Lambda on MicroVMs and lambda simulators. Or Azure functions etc.
Cooking your own serverless platform with Kuberbetes seems like the waste of resources I mentioned earlier and most people who work on serverless would regard maintaining a custom isolation framework as not serverless.
