To Notify the limitations while deploying the VMs from Content library, Datastore Clusters are not supported while deploying VM templates from Content Library.
The cls backend API expects a datastore ID and it doesn't expect datastore cluster, hence InvalidArgument is reported.
Currently there is no resolution.
To avoid this issue, user can do the deployment from outside the Content Library.
Deploy a Virtual Machine from a Template in the vSphere Web Client
Note:
The same set of steps can be followed for vCenter versions 6.7, 7.x, and 8.x.
This issue is being checked by Diagnostics for VMware Cloud Foundation.
The check is as follows: