You do not need to remove existing Azure Local resources, such as the Arc bridge and cluster, before creating an Azure Kubernetes Service (AKS) cluster on Azure Arc. Instead, you can create the AKS cluster directly in your existing Azure Stack HCI environment configured with Azure Local.
The recommended approach is to utilize the Azure CLI to create the AKS cluster. You can follow the steps outlined in the Azure documentation for creating Kubernetes clusters using Azure CLI, ensuring that your cluster is Azure Arc-connected by default. Make sure to configure the necessary permissions and access for your Microsoft Entra users during the cluster creation process.
Since your environment consists of three physical nodes running Azure Stack HCI and is managed through Windows Admin Center, you can leverage these existing resources without starting from scratch.
For further details on creating the AKS cluster, refer to the Azure documentation on AKS on Azure Local.