Hello karkit,
I ran a quick WSL 2 lab on Windows Server 2025 and successfully installed Ubuntu 22.04.
One thing worth checking is whether virtualization is actually available to WSL, even if the Windows features are enabled.
In my case, WSL initially failed to start because nested virtualization was disabled in my Hyper-V VM. Enabling it resolved that issue.
I'd suggest checking:
Run wsl --status and wsl --list --verbose.
Make sure Virtual Machine Platform is enabled.
If Windows is running inside a VM, verify that nested virtualization is enabled on the host.
Restart Windows after changing virtualization settings.
I've attached a screenshot showing my Ubuntu instance running successfully under WSL 2.
I couldn't reproduce your exact 0x80070002 error, so this may not be the same root cause.
Could you share the output of wsl --status and wsl --list --verbose? That would help narrow things down without risking your existing Ubuntu data.
Hope this helps!