Beyond the other reasons, the idea is that you can keep the hypervisor (host OS) minimal and stable and so it’s less likely to break. Whereas you can break the VM to your heart’s content and you’ll still have access to the host and don’t need to rely on live USB etc to recover (or even video access since you can still access the host over the network). You can also migrate the VM to a new system more simply since it’s just a VM with simpler, abstracted hardware that is less likely to run into driver issues.

One downside of a VM is that GPU passthrough/GVT-g isn’t always stable or performant (especially the latter), so you might want to keep some services on the host if they GPU access (such as transcoding). You can still access the files in the VM over NFS/Samba from the host. I’d use containers at least, sticking with the principle of keeping the hypervisor OS as minimal as possible.