Can you run and attach the output tarball on the target system where you
see this fail:

cloud-init collect-logs


With respect to your use-case; cloud-init does not directly control what 
packages do at install time.  Some package may require post-install 
configuration, or are not typically installed during the boot process.   Just 
testing your config, installing lightdm brings in over 500 packages and took 
about 12 minutes to install;  This is a bit of an uphill struggle; I can say 
that the Ubuntu Server installer isn't typically used to install Ubuntu 
Desktop; have you looked at just using the Ubuntu Desktop installer with OEM 
mode? https://help.ubuntu.com/community/Ubuntu_OEM_Installer_Overview 

I suspect you'll need to employ some additional changes to the cloud-
config to handle these edge cases; I don't think the respective
packages, like gdm, would change.

I would suggest that you add a runcmd to restart gdm or other packages
which might need to restart after the initial install;  reload any
installed systemd units with daemon-reload and then restart gdm.
runcmds are executed after package install.

runcmd:
  - systemctl daemon-reload
  - systemctl gdm restart

> If i switch to another tty, then i can see cloud-config running,
messing up tty login prompt

cloud-init is configured to write to the console by default; that's why
you see output from cloud-init on your tty.

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https://bugs.launchpad.net/bugs/1907107

Title:
  cloud-init runs too late at first startup after ubuntu autoinstall

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