Well, that involves running a weird nested stack: The CoreOS systemd, wrapped around a bunch of docker instances, one of which is trying to run the arch Linux systemd inside the container as well.

For what it's worth, Docker containers are generally not complete running machines with their own init system. Instead, they're typically a single top-level process running in an isolated container. Basically, they work more like a Heroku app than complete EC2 machine image.

Exactly. I don't expect Upstart or even SysV init (in the configuration as provided by distributions) to work well inside Docker either.

For an example how you should build a Docker container, take a look at http://phusion.github.io/baseimage-docker/