What i have had to do is follow what a lot of people reporting issues with Azure Automation and this same issue. I removed Az.Accounts down to version 2.6.0. Im not sure if that, or a further reboot resolved it all, but once i was there, I could deploy my cluster.

Also, you say here that your host has 32GB of RAM. I ran into issues with only 32GB RAM when i tried to deploy the AKS Cluster via WAC. When it tried to validate the environment, it told me it needed 16GB of RAM free to get any further. With the AKS Control Plane instance consuming 8GB RAM and several tabs open locally on the server, it was difficult to get that free. I ended up sticking more RAM in the PC.

It will need the hyper-v feature on the Windows Server machine. If you install it on VMware vSphere, you will need to install it using nested virtualization.

Btw if this is the scenario, also check out our latest announcement with AKS Lite: https://learn.microsoft.com/en-us/azure-stack/aks-hci/aks-lite-overview?WT.mc_id=modinfra-0000-thmaure

here you have a full overview post about the new stuff https://www.thomasmaurer.ch/2022/10/new-aks-hybrid-deployment-options-enabled-by-azure-arc-aks-lite-and-hybrid-benefit/