Additional SQL Server features and topics not covered by specific categories
AFAIK, the behavior you are seeing is a limitation of the SQL Server bootstrapper application. The web downloader is a lightweight wrapper designed for interactive use. It is hardcoded to prioritize the Azure Extension page before it even launches the actual SQL Server setup engine. To bypass this, try selecting the Download Media option rather than the Basic or Custom install options. Once you have downloaded the full installer package and extracted it to a local directory, you will find a setup.exe file that supports standard command line arguments without the wrapper interference.
When running the installation from the extracted media, the installer should respect the specific flag to disable the Azure connection requirement. You must ensure that you are using the value 0 rather than False or No, as the installer is pedantic about integer values for this specific parameter. Using the /Q or /QS switch is also vital to ensure the UI is suppressed entirely, which prevents the installer from pausing at any feature selection screens. If you continue to use the small bootstrapper file, it will continue to ignore your flags because that file is not the actual installer, but merely a downloader that ignores command line parameters.
The following command, when run from the root of the extracted installation media, should perform a silent installation while explicitly disabling the Azure Extension for SQL Server.
setup.exe /Q /ACTION=Install /IACCEPTSQLSERVERLICENSETERMS /FEATURES=SQL /INSTANCENAME=SQLEXPRESS /AZUREEXTENSIONENABLED=0
If you are currently using a configuration file, you should verify that the AzureExtensionEnabled setting is not present within the INI file, as command line parameters can sometimes conflict with file-based settings. By providing the flag directly on the command line to the extracted setup.exe, the engine skips the validation logic for Azure credentials and proceeds directly to the database engine installation. If the setup still fails to progress, you should check the Detail.txt log file located in the Program Files Microsoft SQL Server setup bootstrap log folder to see if a secondary dependency is triggering the pause.
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hth
Marcin