I suspect they just don't want to publicly commit to Windows compatibility due to licensing issues.
Not really. It is a long way behind Rosetta.
(Partially because Apple only built the M1 to be optimised for running Mac apps in emulation, partially because Apple had spent five years deprecating older software very aggressively so nobody expected those things to work, partially because it's genuinely hard, and partially because it's not very good.)
(Source: I recently left VMware)
What the Insider ARM builds did give you that hasn't been in a release version (until tomorrow) was x86-64 emulation support and a few other minor ARM improvements and an easy way to source a compiled ISO directly from Microsoft.
As far as activating a standard Windows 10 license will activate Windows 10/11 for ARM even if the EULA says it won't and, regardless, switching to Insider builds doesn't sidestep licensing as you need to be licensed to join a PC to the program and the ISO installer has the same licensing and EULA requirements as a normal installer ISO.
I could very well be wrong here, but I don’t think running Desktop Linux in a VM is a very large market, and I would just use Docker to run CLI tools. There aren’t really any Killer X Windows Apps that won’t run natively on macOS?