wsl is completely busted in new Windows update: WslRegisterDistribution failed with error: 0x80070002

Did anyone figure out how to solve this problem? I am getting this error after the new Windows update.

Installing, this may take a few minutes...
WslRegisterDistribution failed with error: 0x80070002
Error: 0x80070002 The system cannot find the file specified.

I did search for this error, this is what I am doing for the last 3 hours. I did reboot, reinstalled wsl, containers, hyper-v, rebooted 15 times or more. It's unbeliveble!

Also, on this version docker does not work.It fails with : [Error ] Failed to deploy distro docker-desktop to..