I figured out colima could be updated, but that didn’t help.
But besides that I wonder why I can’t start VMs I got the message something like KVM is missing. Colima looks like an ordinary Ubuntu. It can’t provide KVM because it uses Apples HVF?
You can run VMs inside of the Colima VM, but you need to be on an Apple platform that supports it (M2 or higher I believe) and you need the Colima VM to have it enabled too.
There is a --nested-virtualization flag you need to pass and in my case I also had to pass --vm-type=vz (my MacOS test environment is an M4 Mac Mini).
IIUC, rosetta lets you run x86 binaries, not x86 VMs. For example, you could run an amd64 docker container image (I haven’t tested it myself). But you couldn’t boot an x86 kernel.
You can always use qemu for running VMs, arm or x86, but it will be slooooooow.
EDIT: to be clear, the nested virtualization with M3 + macOS 15 is arm VMs inside arm VMs.