Thanks for clarifying the mystery! I tested it. Indeed adding --storage-driver vfs to the right-most podman makes it work. Here is an example of that (-v /dev/fuse:/dev/fuse:rw was also removed)
[core@fedora ~]$ podman run --rm --ulimit host --privileged --rm quay.io/podman/stable podman --storage-driver vfs run --user 0 docker.io/library/alpine:3.12.1 ls | head -5
Trying to pull docker.io/library/alpine:3.12.1...
Getting image source signatures
Copying blob sha256:188c0c94c7c576fff0792aca7ec73d67a2f7f4cb3a6e53a84559337260b36964
Copying config sha256:d6e46aa2470df1d32034c6707c8041158b652f38d2a9ae3d7ad7e7532d22ebe0
Writing manifest to image destination
Storing signatures
bin
dev
etc
home
lib
[core@fedora ~]$
I thought I was already using fuse-overlayfs. I don’t quite follow.
Anyway, in the project I’m writing, I now use --volume to bind-mount a directory over /var/lib/containers. It works! I don’t see the error message anymore.