Just to follow up on the above:
When it fails we see this.
=======================================
Write-ErrorLog : CreateResourceGroupFailed : Could not create resource group resourceId: subscriptions/77585cb5-cc1b-47a6-b60d-4c1ec4b078fc/resourceGroups/SYSHCL50-DK0-Arc. CorrelationId: 148081ec-6b6a-4d7e-ab8f-00a9cf0cbbe1 At C:\Program Files\WindowsPowerShell\Modules\Az.StackHCI\1.2.0\Az.StackHCI.psm1:2537 char:9 + Write-ErrorLog -Exception $_.Exception -Category OperationSto ... + ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
+ CategoryInfo : OperationStopped: (:) [Write-Error], ErrorResponseMessageException
+ FullyQualifiedErrorId : Microsoft.Azure.Commands.ResourceManager.Cmdlets.Entities.ErrorResponses.ErrorResponseMessageException,Write-ErrorLog
Write-ErrorLog : Exception occurred in Register-AzStackHCI : At C:\Program Files\WindowsPowerShell\Modules\Az.StackHCI\1.2.0\Az.StackHCI.psm1:2492 char:35
+ ... $arcres = New-AzResource -ResourceId $arcResourceId -ApiVersion $HC ...
+ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
At C:\Program Files\WindowsPowerShell\Modules\Az.StackHCI\1.2.0\Az.StackHCI.psm1:2542 char:9
+ Write-ErrorLog ("Exception occurred in Register-AzStackHCI : ...
+ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
+ CategoryInfo : OperationStopped: (:) [Write-Error], WriteErrorException
+ FullyQualifiedErrorId : Microsoft.PowerShell.Commands.WriteErrorException,Write-ErrorLog
=======================================
The line to pay attension to is this:
Write-ErrorLog : Exception occurred in Register-AzStackHCI : At C:\Program Files\WindowsPowerShell\Modules\Az.StackHCI\1.2.0\Az.StackHCI.psm1:2492 char:35
Lookin in the Az.StackHCI.psm1 at line 2492 we see
$arcres = New-AzResource -ResourceId $arcResourceId -ApiVersion $HCIArcAPIVersion -PropertyObject $arcInstanceResourceGroup -Force
And NO parsing on of Tags.
We have temporarily disabled the Policy that requires Tags on RG's and then the Register-AzStackHCI ran through and created the RG for Arc