I got this working as follows:
lxc init images:ubuntu/jammy c1
lxc config device add c1 loop-control unix-char path=/dev/loop-control
lxc config device add c1 loop1 unix-block path=/dev/loop1 #May have to repeat this until you add a free device
lxc config set c1 \
security.syscalls.intercept.mount=true \
security.syscalls.intercept.mount.allowed=ext4
lxc start c1
lxc exec c1 -- truncate -s 1GiB loop.img
lxc exec c1 -- mkfs.ext4 loop.img
lxc exec c1 -- mount -t ext4 -o loop loop.img /mnt/
lxc exec c1 -- mount | grep /mnt
/root/loop.img on /mnt type ext4 (rw,relatime)