The important step to get nested virtualization enabled is to select Security type = Standard for your VM.
Note: In most of the cases for me, RDP failed to authenticate to the VM with standard security type.
If RDP client fails to login - reset password from left menu for the VM in Azure portal.
- Open Microsoft Azure Subscription Portal
- Select the VM
- After Selecting your VM Navigate to Support + troubleshooting >> Reset from left menu.
- Enter existing username.
- Enter a password and click update.