Can you show me how you created your VM, I would like to check the agent is starting OK here.
The config drive is a CDROM that is attached to the VM guest and allows cloud-init inside the VM to read the cloud init config from LXD, which can then be used to set a login password.
See the " Extra steps for official Ubuntu images" section in Running virtual machines with LXD 4.0 (although in principle its not limited to ubuntu images).