I think this is accurate. WSL v1 did not use a VM, just like Wine. However both WSL v1 and Wine struggled with compatibility issues. WSL 2 gave up and used a VM instead. You pay a performance penalty but compatibility issues mostly go away.

Well, I discrepe a lot with the "compatibility issues" of Wine... Essentially when sometimes can run better and with less issues legacy software that modern Windows.

Example: My company uses MS Teams for meetings. Wine cannot run it reliably.

Counter example: my windows 10 machine can't play my copy of crysis, but my Ubuntu machine can under wine.

To be fair. Neither can my MacBook, and that is an official release.