It's a VM, right? So whatever you put in the base image will be available, just like with a container. It's just fast to provision and small.

In this case the base image is then a packaging format, which takes us back to building special AMIs for this. Used to do EC2 deployments like this in the early days, using Packer.io.

Prefer containers because build once run anywhere, as opposed to build for each deployment target.

So essentially pairing Firecracker with Lambda will reduce Lambda down to a simple trigger that can spin up one of these VMs where before Lambda ran the code?

Yes, and the fact that each Lambda executor is a VM allows the execution of any code in any language using any server.