I can see you are getting the error on your Azure VM:
WslRegisterDistribution failed with error: 0x80370102
Please enable the Virtual Machine Platform Windows feature and ensure virtualization is enabled in the BIOS.
For information please visit https://aka.ms/enablevirtualization
Likely the issue you are facing is that Trusted Launch needs to be disabled. Currently Trusted Launch does not support Nested Virtualization. When launching your VM please set the Security Type to Standard, currently the portal enables Trusted Launch by default.
To verify that it works I launched Standard D8s v3 VM and enabled WSL 2 following the instructions here. Launched Powershell and ran "wsl --install".
After Reboot:
Hope this helps! Let me know if that is not the issue and we can work with you directly to troubleshoot.
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