Hi devopsfj,
I'm glad that you were able to resolve your issue and thank you for posting your solution so that others experiencing the same thing can easily reference this! Since the Microsoft Q&A community has a policy that "The question author cannot accept their own answer. They can only accept answers by others ", I'll repost your solution in case you'd like to "Accept " the answer.
Issue:
Azure Kubernetes Service - Why Are System Pods Being Scheduled On User Node Pools?
Solution:
I believe I may have found the issue to what was happening...
I believe my System Nodes did not have the accepted amount of CPU/Memory left to facilitate all system pods with the CriticalAddonsOnly:true:NoSchedule taint.
Once I increased my system nodes to have the recommended specs as stated here on MS Docs.
All of the system pods were schedules on the system nodes (apart from Daemon Sets of course)
If you have any other questions or are still running into more issues, please let me know. Thank you again for your time and patience throughout this issue.
Please remember to "Accept Answer" if any answer/reply helped, so that others in the community facing similar issues can easily find the solution.
Thank you.