abhi, thank you for posting this question on Microsoft Q&A.
After enabling the "Diagnostic Setting", you can use the "Sink" option to set the target as "Application Insights". When creating this AppInsights, you can set your specific LA Workspcae as the backend workspace for insights so that the data gets to the correct workspace. For more details, see Install and configure the Azure Diagnostics extension for Windows (WAD)
However, for monitoring Azure VMs, generally the "Azure Monitor Agent" is the preferred agent for collection of logs and performance data and storing them to LA workspace. You can either configure these data collection through "Data Collection Rule", which requires manual rule creation OR you can use "Azure VM Insights" which also uses the agent but provides a quick and easy method for getting started monitoring the client workloads on your virtual machines and virtual machine scale sets.
Hope this helps.
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