Which Linux distro do you recommend for running KVM? Additionally, SmartOS has good support for running KVM virtual machines [1]. It gives good solid stability and integration with ZFS, not sure of the performance though vs Linux. The main downside of SmartOS is somewhat sporadic hardware support (broadcom nic's out, intel nic's in). I prefer SmartOS now where I can, but knowing which Linux distro is useful especially for GPU support.
No, the contents of the instances are managed by a separate NixOps network, since it would be wasteful to send the full image (~1GB) for each instance each time a package is updated.
The purpose of the base image is to preinstall something that's ready for NixOps to "take over" with whatever I actually want to run on the VM.
The management tools along with the stability of the overall system. Debian might be a good choice for stability. Though it seems Redhat (maybe CentOS?) has a good lead on much of the KVM enterprise tools.
1: https://www.joyent.com/blog/why-smartos-kvm-dtrace-zones-and...