Hello @Christopher Isidora ,
Thank you for reaching out to Microsoft Q&A platform. Happy to answer your question.
Dv3 and Ev3 will be the right choice to set up nested virtualization on gen2 azure VMs. Can you try one of these SKUs on the azure VMs and set up WSL and Hyper-V and check?
Please "Accept as Answer" if any of above helped so that, it can help others in community looking for remediation for the similar issues.