Hello @Desmond Fernando ,
The issue is most likely with your override template parameters only.
Sorry, I overlooked your screenshot earlier. From your screenshot, it seems like you are using the "SQL authentication" connection string in your override template parameter for your SQL linked server connection string.
I tested using SQL authentication connection string on the "SQL linked server connection string" value, then the authentication is changed to - "SQL auth"
If I level it blank, it reflects the "System managed identity."
Here is a sample SQL connection string with SQL authentication that I have used on my override template parameter.
Server=tcp:myserver.database.windows.net,1433;Initial Catalog=demoDB;Persist Security Info=False;User ID=Demouser;Password={your_password};MultipleActiveResultSets=False;Encrypt=True;TrustServerCertificate=False;Connection Timeout=30;
I hope this helps.