afaik btrfs is can do all the things you listed.
im using open suse with btrfs and can only recommend it.
the setup was easy ( asside from non btrfs related issues with the finicky installation media)
and open suse automaticly sets up subvolumes and snapshots before and after each update
to take advantage of btrfs
its not on the same board,
but you could build something like that with a gp-2040 board and a raspberry pi running RetroPie
not sure if fightcade runs well on the raspberry pi’s arm chip tho (since you called it a fightstick instead of arcade stick)