diff --git a/internal/oci/uvm.go b/internal/oci/uvm.go
index ece82e3d9b..889e31f09e 100644
--- a/internal/oci/uvm.go
+++ b/internal/oci/uvm.go
@@ -196,7 +196,7 @@ func handleLCOWSecurityPolicy(ctx context.Context, a map[string]string, lopts *u
 	lopts.SecurityPolicy = ParseAnnotationsString(a, annotations.LCOWSecurityPolicy, lopts.SecurityPolicy)
 	// allow actual isolated boot etc to be ignored if we have no hardware. Required for dev
 	// this is not a security issue as the attestation will fail without a genuine report
-	noSecurityHardware := ParseAnnotationsBool(ctx, a, annotations.LCOWNoSecurityHardware, false)
+	noSecurityHardware := ParseAnnotationsBool(ctx, a, annotations.NoSecurityHardware, false)
 
 	// if there is a security policy (and SNP) we currently boot in a way that doesn't support any boot options
 	// this might change if the building of the vmgs file were to be done on demand but that is likely
@@ -245,15 +245,36 @@ func handleWCOWSecurityPolicy(ctx context.Context, a map[string]string, wopts *u
 		return fmt.Errorf("minimum 2048MB of memory is required for confidential pods, got: %d", wopts.MemorySizeInMB)
 	}
 
-	wopts.AllowOvercommit = ParseAnnotationsBool(ctx, a, annotations.AllowOvercommit, false)
-	if wopts.AllowOvercommit {
-		return fmt.Errorf("allow overcommit MUST be false for confidential pods")
-	}
-
 	wopts.SecurityPolicyEnforcer = ParseAnnotationsString(a, annotations.WCOWSecurityPolicyEnforcer, wopts.SecurityPolicyEnforcer)
 	wopts.DisableSecureBoot = ParseAnnotationsBool(ctx, a, annotations.WCOWDisableSecureBoot, false)
 	wopts.GuestStateFilePath = ParseAnnotationsString(a, annotations.WCOWGuestStateFile, uvm.GetDefaultConfidentialVMGSPath())
-	wopts.IsolationType = ParseAnnotationsString(a, annotations.WCOWIsolationType, "")
+	wopts.IsolationType = "SecureNestedPaging"
+	if noSecurityHardware := ParseAnnotationsBool(ctx, a, annotations.NoSecurityHardware, false); noSecurityHardware {
+		wopts.IsolationType = "GuestStateOnly"
+	}
+	if err := handleWCOWIsolationType(ctx, a, wopts); err != nil {
+		return err
+	}
+
+	return nil
+}
+
+func handleWCOWIsolationType(ctx context.Context, a map[string]string, wopts *uvm.OptionsWCOW) error {
+	isolationType := ParseAnnotationsString(a, annotations.WCOWIsolationType, wopts.IsolationType)
+	switch isolationType {
+	case "SecureNestedPaging", "SNP": // Allow VBS & SNP shorthands
+		wopts.IsolationType = "SecureNestedPaging"
+		wopts.AllowOvercommit = false
+	case "VirtualizationBasedSecurity", "VBS":
+		wopts.IsolationType = "VirtualizationBasedSecurity"
+		wopts.AllowOvercommit = false
+	case "GuestStateOnly":
+		wopts.IsolationType = "GuestStateOnly"
+		wopts.AllowOvercommit = false
+	default:
+		return fmt.Errorf("invalid WCOW isolation type %q", isolationType)
+	}
+
 	return nil
 }
 
diff --git a/internal/oci/uvm_test.go b/internal/oci/uvm_test.go
index 4a4ceed5c2..f8405c64c6 100644
--- a/internal/oci/uvm_test.go
+++ b/internal/oci/uvm_test.go
@@ -158,8 +158,8 @@ func Test_SpecToUVMCreateOptions_WCOW_Confidential_Defaults(t *testing.T) {
 	if wopts.GuestStateFilePath != uvm.GetDefaultConfidentialVMGSPath() {
 		t.Fatalf("expected GuestStateFilePath to default to %q, got %q", uvm.GetDefaultConfidentialVMGSPath(), wopts.GuestStateFilePath)
 	}
-	if wopts.IsolationType != "" {
-		t.Fatalf("expected empty IsolationType by default, got %q", wopts.IsolationType)
+	if wopts.IsolationType != "SecureNestedPaging" {
+		t.Fatalf("expected SecureNestedPaging IsolationType by default, got %q", wopts.IsolationType)
 	}
 }
 
@@ -218,20 +218,6 @@ func Test_SpecToUVMCreateOptions_WCOW_Confidential_ErrorOnLowMemory(t *testing.T
 	}
 }
 
-func Test_SpecToUVMCreateOptions_WCOW_Confidential_ErrorOnAllowOvercommit(t *testing.T) {
-	s := &specs.Spec{
-		Windows: &specs.Windows{HyperV: &specs.WindowsHyperV{}},
-		Annotations: map[string]string{
-			annotations.WCOWSecurityPolicy: "test-policy",
-			annotations.AllowOvercommit:    "true",
-		},
-	}
-
-	if _, err := SpecToUVMCreateOpts(context.Background(), s, t.Name(), ""); err == nil {
-		t.Fatal("expected error for confidential pods when AllowOvercommit=true, got nil")
-	}
-}
-
 func Test_SpecToUVMCreateOptions_WCOW_Confidential_Overrides(t *testing.T) {
 	s := &specs.Spec{
 		Windows: &specs.Windows{HyperV: &specs.WindowsHyperV{}},
diff --git a/internal/uvm/create_wcow.go b/internal/uvm/create_wcow.go
index aedd960776..aa4465fabf 100644
--- a/internal/uvm/create_wcow.go
+++ b/internal/uvm/create_wcow.go
@@ -220,9 +220,8 @@ func prepareCommonConfigDoc(ctx context.Context, uvm *UtilityVM, opts *OptionsWC
 			RegistryChanges: &registryChanges,
 			ComputeTopology: &hcsschema.Topology{
 				Memory: &hcsschema.VirtualMachineMemory{
-					SizeInMB:        memorySizeInMB,
-					AllowOvercommit: opts.AllowOvercommit,
-					// EnableHotHint is not compatible with physical.
+					SizeInMB:             memorySizeInMB,
+					AllowOvercommit:      opts.AllowOvercommit,
 					EnableHotHint:        opts.AllowOvercommit,
 					EnableDeferredCommit: opts.EnableDeferredCommit,
 					LowMMIOGapInMB:       opts.LowMMIOGapInMB,
@@ -382,8 +381,6 @@ func prepareSecurityConfigDoc(ctx context.Context, uvm *UtilityVM, opts *Options
 		}
 	}
 
-	memoryBacking := hcsschema.MemoryBackingType_PHYSICAL
-	doc.VirtualMachine.ComputeTopology.Memory.Backing = &memoryBacking
 	doc.SchemaVersion = schemaversion.SchemaV25()
 	doc.VirtualMachine.Version = &hcsschema.Version{
 		Major: 11,
diff --git a/pkg/annotations/annotations.go b/pkg/annotations/annotations.go
index b00522344b..9e857340d2 100644
--- a/pkg/annotations/annotations.go
+++ b/pkg/annotations/annotations.go
@@ -145,10 +145,9 @@ const (
 	// Deprecated: use [LCOWHostAMDCertificate] instead.
 	HostAMDCertificate = LCOWHostAMDCertificate
 
-	// LCOWNoSecurityHardware allows us, when it is set to true, to do testing and development without requiring SNP hardware.
-	LCOWNoSecurityHardware = "io.microsoft.virtualmachine.lcow.no_security_hardware"
-	// Deprecated: use [LCOWNoSecurityHardware] instead.
-	NoSecurityHardware = LCOWNoSecurityHardware
+	// NoSecurityHardware allows us, when it is set to true, to do testing and development without requiring SNP hardware.
+	//
+	NoSecurityHardware = "io.microsoft.virtualmachine.no_security_hardware"
 
 	// LCOWSecurityPolicy is used to specify a security policy for opengcs to enforce.
 	LCOWSecurityPolicy = "io.microsoft.virtualmachine.lcow.securitypolicy"