The ability to create a new vSAN storage policy with FTT "1 failure - RAID-5 (Erasure Coding) is prohibited with the message "RAID-5/6 (Erasure Coding) - Capacity requires an All Flash Configuration"
ESXi7.x
vSAN Cluster is stretched
All licensing requirements are met
Storage Tier set to 'No-Preference' in Storage Rule Tab.
This is the default setting but can be changed by selecting the Storage Rules Tab and selecting the 'All Flash' option.
Change Storage Tier to 'All Flash' and continue with the wizard. This will allow the Policy Creation to complete successfully.