Apparently the relevant limit is
/proc/sys/fs/inotify/max_user_instances. This is "128" by default. When
increasing it with

   sudo sysctl fs.inotify.max_user_instances=256

then the failed container reboots fine (and udev starts).

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https://bugs.launchpad.net/bugs/1602192

Title:
  when starting many LXD containers, they start failing to boot with
  "Too many open files"

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