Hello Ajinkya,
I am having the exact same issue, and also there is another thread open for the same - https://community.databricks.com/t5/data-governance/metastore-creation-azure-databricks-internal-server-error/td-p/39514 (opened on 10-08-2023 which is pretty recent as per the date of creation for this thread).
The only difference I noted from this thread and when I tried creating Metastore first time is that the Access connector for databricks requires a "Storage Blob Data Owner" role in the IAM of the storage account. Although doing that did not resolve my problem.
You can try the resolutions mentioned in the above thread, even though I tried them I am still facing the same Internal Server Error. I highly doubt this error is on our side (role issues), and its recent as well. I went ahead and force created the metastore, and up until now I was able to create a catalog in the metastore.
Will update on my findings for this in future.