How to run WSL from Windows Terminal?

Question

I installed WSL1 and Ubuntu 22.04 from the Windows Store. The installation was fine and the terminal is working fine when launched via the Ubuntu icon. However, when trying to launch it from the dropdown in Windows Terminal, it fails. Below is the error message.

Additional Information

Windows Version: 10.0.19044.1706

Windows Terminal Version: 1.7.1033.0

Windows Terminal JSON File

// This file was initially generated by Windows Terminal 0.11.1251.0
// It should still be usable in newer versions, but newer versions might have additional
// settings, help text, or changes that you will not see unless you clear this file
// and let us generate a new one for you.

// To view the default settings, hold "alt" while clicking on the "Settings" button.
// For documentation on these settings, see: https://aka.ms/terminal-documentation
{
  "$schema": "https://aka.ms/terminal-profiles-schema",

  "defaultProfile": "{0caa0dad-35be-5f56-a8ff-afceeeaa6101}",

  // You can add more global application settings here.
  // To learn more about global settings, visit https://aka.ms/terminal-global-settings

  // If enabled, selections are automatically copied to your clipboard.
  "copyOnSelect": false,

  // If enabled, formatted data is also copied to your clipboard
  "copyFormatting": false,

  // A profile specifies a command to execute paired with information about how it should look and feel.
  // Each one of them will appear in the 'New Tab' dropdown,
  //   and can be invoked from the commandline with `wt.exe -p xxx`
  // To learn more about profiles, visit https://aka.ms/terminal-profile-settings
  "profiles": {
    "defaults": {
      // Put settings here that you want to apply to all profiles.
    },
    "list": [
      {
        // Make changes here to the powershell.exe profile.
        "guid": "{61c54bbd-c2c6-5271-96e7-009a87ff44bf}",
        "name": "Windows PowerShell",
        "commandline": "powershell.exe",
        "hidden": false
      },
      {
        // Make changes here to the cmd.exe profile.
        "guid": "{0caa0dad-35be-5f56-a8ff-afceeeaa6101}",
        "name": "Command Prompt",
        "commandline": "cmd.exe",
        "hidden": false
      },
      {
        "guid": "{b453ae62-4e3d-5e58-b989-0a998ec441b8}",
        "hidden": false,
        "name": "Azure Cloud Shell",
        "source": "Windows.Terminal.Azure"
      },
      {
        "guid": "{07b52e3e-de2c-5db4-bd2d-ba144ed6c273}",
        "hidden": false,
        "name": "Ubuntu-20.04",
        "source": "Windows.Terminal.Wsl"
      },
      {
          "guid": "{2c4de342-38b7-51cf-b940-2309a097f518}",
          "hidden": false,
          "name": "Ubuntu",
          "source": "Windows.Terminal.Wsl"
      },
      {
          "guid": "{60c3e313-8e1a-58f6-8175-3650c2bd2b26}",
          "hidden": false,
          "name": "Ubuntu 22.04 LTS",
          "source": "CanonicalGroupLimited.Ubuntu22.04LTS_79rhkp1fndgsc"
      },
      {
          "guid": "{17bf3de4-5353-5709-bcf9-835bd952a95e}",
          "hidden": true,
          "name": "Ubuntu-22.04",
          "source": "Windows.Terminal.Wsl"
      }
    ]
  },

  // Add custom color schemes to this array.
  // To learn more about color schemes, visit https://aka.ms/terminal-color-schemes
  "schemes": [],

  // Add custom keybindings to this array.
  // To unbind a key combination from your defaults.json, set the command to "unbound".
  // To learn more about keybindings, visit https://aka.ms/terminal-keybindings
  "keybindings": [
    // Copy and paste are bound to Ctrl+Shift+C and Ctrl+Shift+V in your defaults.json.
    // These two lines additionally bind them to Ctrl+C and Ctrl+V.
    // To learn more about selection, visit https://aka.ms/terminal-selection
    {
      "command": {
        "action": "copy",
        "singleLine": false
      },
      "keys": "ctrl+c"
    },
    {
      "command": "paste",
      "keys": "ctrl+v"
    },

    // Press Ctrl+Shift+F to open the search box
    {
      "command": "find",
      "keys": "ctrl+shift+f"
    },

    // Press Alt+Shift+D to open a new pane.
    // - "split": "auto" makes this pane open in the direction that provides the most surface area.
    // - "splitMode": "duplicate" makes the new pane use the focused pane's profile.
    // To learn more about panes, visit https://aka.ms/terminal-panes
    {
      "command": {
        "action": "splitPane",
        "split": "auto",
        "splitMode": "duplicate"
      },
      "keys": "alt+shift+d"
    }
  ]
}

PATH Variables

On running wsl -l -v in Powershell, I get:

 NAME            STATE           VERSION
* Ubuntu-22.04    Running         2

On running wsl -d ubuntu-22.04, I get this message and then the bash prompt:

Welcome to Ubuntu 22.04 LTS (GNU/Linux 5.10.16.3-microsoft-standard-WSL2 x86_64)

 * Documentation:  https://help.ubuntu.com
 * Management:     https://landscape.canonical.com
 * Support:        https://ubuntu.com/advantage
/etc/update-motd.d/50-landscape-sysinfo: 17: cannot create /var/lib/landscape/landscape-sysinfo.cache: Permission denied
  System information as of Thu May 26 12:31:50 PM IST 2022

  System load:  0.1845703125       Processes:             12
  Usage of /:   0.7% of 250.98GB   Users logged in:       0
  Memory usage: 1%                 IPv4 address for eth0: 192.168.84.198
  Swap usage:   0%


37 updates can be applied immediately.
22 of these updates are standard security updates.
To see these additional updates run: apt list --upgradable