Ok i figured it out. Seems like you need to have a valid or empty Network Config. When using the default commented out config it will not work. If i empty the Network Config field or uncomment all the lines it will work as expected.

---

Following works

User Config

#cloud-config
hostname: testmachine2
ssh_authorized_keys:
  - ssh-rsa AAAAB3NzaC1yc2EAAAADAQABA...
packages:
  - xe-guest-utilities

Network Config

network:
  version: 1
  config:
  - type: physical
    name: eth0
    subnets:
      - type: dhcp

---

Following does not work

User Config

#cloud-config
hostname: testmachine2
ssh_authorized_keys:
  - ssh-rsa AAAAB3NzaC1yc2EAAAADAQABA...
packages:
  - xe-guest-utilities

Network Config

#network:
#  version: 1
#  config:
#  - type: physical
#    name: eth0
#    subnets:
#      - type: dhcp

Hi!

Im have problems with cloud-init Custom config. SSH Key works but not Custom Config.

1. Download focal-server-cloudimg-amd64.ova from
   https://cloud-images.ubuntu.com/focal/current/
2. Import it in Xen Orchestra (xo-server 5.79.5, xo-web 5.82.0)
3. Convert the imported ova vm to template.
4. Create VM from the template with Install Settings "SSH Key" and my ssh key.
5. VM boots and i can ssh to the machine with user: ubuntu and my SSH key.
6. mount /dev/xvdb /mnt/ and copy /mnt/user-data

#cloud-config
hostname: ubuntu-focal-20.04-cloudimg
ssh_authorized_keys:
  - ssh-rsa AAAAB3NzaC1yc2EAAAADAQABA....

7. Create new VM from the template with Install Settings "User Config" and the config I copied from /mnt/user-data
8. VM boots and i can NOT login with user: ubuntu and my SSH key.

So what is missing from the User Config that is in the SSH Key cloud-init?

Best regards,
Patrik