Thanks for the analysis! systemd appears to set this value in:

./sysctl.d/50-pid-max.conf:kernel.pid_max = 4194304

One possible solution is we could override this in our minimal images
only by setting the value to the lower value in
/etc/sysctl.d/90-override.conf

** Also affects: cloud-images
   Importance: Undecided
       Status: New

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https://bugs.launchpad.net/bugs/1888001

Title:
  Focal minimal cloud image: failed to apply kernel variables

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