Looking at the Linked Instances, most instances have at most a few hundred instances linked. What happens when there are thousands, or possibly even millions? Could too many instances require significantly more powerful hardware, or even be impossible altogether?
Yes, you can use docker: https://join-lemmy.org/docs/administration/install_docker.html
I recommend using a VPS with wireguard and a cheap used workstation like a Dell Optiplex for the actual hosting. That way you can forward all ports without your ISP knowing.