Indeed this is expected behavior.  Since there is no way to
create a btrfs subvolume in this instance, and you explicitly
asked for a btrfs subvolume, it should error.  A simple directory
copy must be used.

I think it might be reasonable to say that even if it has to
do a full directory copy, it could still create a new subvolume
so that clones can be done as snapshots.  Patches for either that
or for documentation improvement are welcome, so leaving this bug
open

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https://bugs.launchpad.net/bugs/1486696

Title:
  lxc-create -B btrfs fails if lxc.lxcpath is not on the same filesystem
  as /var/cache/lxc (not a configurable option)

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