Could you report the output of the following command in Powershell (after replacing YOUR_WINDOWS_USERNAME):
powershell.exe -ExecutionPolicy Bypass -File "C:\Users\YOUR_WINDOWS_USERNAME\AppData\Local\Programs\cursor\resources\app\bin\fixWSLNew.ps1" -pathToAdd "C:\Users\YOUR_WINDOWS_USERNAME\AppData\Local\Programs\cursor\resources\app" -scriptPath "C:\Users\YOUR_WINDOWS_USERNAME\AppData\Local\Programs\cursor\resources\app\bin\server-env-setup"
It seems your server-env-setup file isn’t being created by the Fix WSL command and want to dig into why.