Public bug reported:

Issue description:

Trying to run privileged docker container in a privileged LXD container.
Goal would be to run a rancher/agent:v1.0.2 container, but it does not
work with ubuntu:latest either.


Steps to reproduce:

Run a container (ubuntu:16.04, privileged) with instructions found here:
https://www.stgraber.org/2016/04/13/lxd-2-0-docker-in-lxd-712/

Apply lxc profile device add docker tuntap unix-char path=/dev/net/tun to fix 
issue discussed here: 
https://bugs.launchpad.net/ubuntu/+source/lxd/+bug/1593301/comments/2

Run docker run -d --name test --privileged ubuntu:latest which produces the 
following output:
3d6a5d25c7c9390aeb7a447b86e8cf79b33f5b68948bd0238e58c858c2e57c06
docker: Error response from daemon: Container command not found or does not 
exist..

Tested with docker.io 1.10.3 and docker.io 1.11.2(proposed),
unprivileged Docker containers running fine...

This bug has been filed on LXD github repository as well:
https://github.com/lxc/lxd/issues/2172


LXD Host:
DistroRelease: Ubuntu 14.04 LTS 4.4.0-28-generic
Package: lxd 2.0.2-0ubuntu1~16.04.1

Docker container:
DistroRelease: Ubuntu 14.04 LTS 4.4.0-28-generic
Package: docker.io 1.10.3-0ubuntu6

** Affects: docker.io (Ubuntu)
     Importance: Undecided
         Status: New

** Attachment added: "syslog"
   https://bugs.launchpad.net/bugs/1599121/+attachment/4695817/+files/syslog.log

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https://bugs.launchpad.net/bugs/1599121

Title:
  Privileged Docker container in privileged LXD container

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