I really like it for pi, but it really comes down to what your use cases are. For me personally I like OMV a lot, it has a simple interface and the things built in are exactly what I want.
Dietpi is nice if you want to host one of the things they offer by default. I have used it for motioneye which didn't play very well in docker. However I prefer vanilla debian for normal docker stuff.
The best OS to host on will someday be NixOS, bar none IMO. However, that BEST title will depend heavily on someone sharing a config that leverages the power of NixOS to make it as foolproof and rock-solid as other projects that leverage Nix’s power and reliability.
I’d host an instance if we could would move from the world of Docker being the only game in town toward a more reproducible standard config that uses Nix.
I am using Dietpi as a VirtualBox image since it is easy for me to configure. I only have a Windows 10 pro machine and I also use it as homemedia server. The wifey does not like Linux, so I cannot run Linux on it. At the same time, my PC spec is not that great, or you can say a potato PC.
It is an Intel(R) Core(TM)2 Quad CPU Q6600 @ 2.40GHz 8 GB RAM. Even though it is a potato with Windows running on it, I can manage to run two Dietpi virtual boxes, one running for Pihole and the second for Docker.
The Pihole ran for maybe around 3 years, and there was no problem. While for the docker, I keep changing it and rebuilding it since sometimes I messed up with the docker, so I just rebuilt it because DietPi is easy to deploy and fast. Even with that potato, in under 8 minutes, including setting the IP, local host, region, install docker, Portainer, NPM, etc. I can have a fresh install Dietpi with docker ready to use. That's why I never worry to make mistakes on my docker VM.
That is my experience with Dietpi and the reason why I am still using it, so in my opinion, you can try it. Who knows it will fit your need.
I am a bit confused. You said you were going to use Proxmox. It is a hypervisor built on top of Debian. Good choice btw. Why do you need another hosting OS? Proxmox runs the VMs and LXCs and is naturally your hosting OS.
I am looking at proxmox to create the VMs, of which I am considering dietpi.
Note, I am addicted to docker, and whilst I would love to run a bunch of containers within LXC, from my research, it is problematic and unfortunately I don't have time at the moment to learn the intricacies of LXC <> docker.
If your Proxmox machine is not stingent in resources (e.g. storage, memory, etc), I would recommend sticking to distros you find more familiar with. Popular distros such as Debian, Ubuntu, and Arch are also fine. I don't think the overhead is that pronounced.
I have been running docker in LXC (Ubuntu server 22.04 image for the LXC + Official Docker installation, i.e. not Snap) and so far I have not encountered any roadblock from the intricacies between LXC and Docker. Usually they are from within the docker images and the embedded networks. But I am not centralizing all Docker affairs into one LXC. I split them by services. So your mileage may vary.