What worked for me was a simple restart, as suggested by the message.
Line in particular:
"The system may need to be restarted so the changes can take effect"
So, I restarted. 10 or so seconds after sign-in, a pop-up window appears:
But in my case, this was a dud! So I proceeded to install a distribution the normal way, using:
wsl --list --online
to list the available distros.wsl --install -d <DistroName>
where represents an option from the list.In my specific case, I wanted to install Ubuntu
which apparently was already installed, but re-installs and launches anyway.