@GuardianLink Tech ,
I followed the steps shared by you and I am able to reproduce the error. After digging further, I found that the Ubuntu Server 20.04 (Gen 2) template is not in the East US. I used the below command to know the list of images from the publisher in EASTUS.
az vm image list-skus --location eastus --publisher Canonical --offer UbuntuServer --output table
I recommend raising a support ticket to understand in which regions the new version is supported - https://aka.ms/msazuresupport