This is correct. The linux sub-system knows nothing about PVE-users, so you'll have to log in with a Linux/PAM user to proceed. Even if you create PAM-users and log into Proxmox with that, you'll still have to log into the console with the same user.
AFAIK only the "root" user is allowed to log into the shell directly, same with updates, only root is allowed to run the updates from the GUI, even if you're logged in with a PAM-sudo user.