"Provisioning is failing, and I am using a local identifier for my UPN field. That's @domain.local instead of @.domain.com"
Are you using AD Sync? The provisioning doesn't seems to require the UPN of an Azure AD identity. If you are using ADSync then use the .com account and when it joins the domain it should find the associated user on the .local .
Did you set the DNS servers correctly in your VNET on Azure? It should point to your DC on-prem. Otherwise, your newly deployed VMs will not be able to resolve your Domain Name, and cause this joining error
@michawetsYes, I did change the DNS server. I tried a different solution and am now able to create a host pool through Az powershell. I'm getting errors as well, but they are not related to this thread anymore. For example, only admin users can start a session amongst other things.