It looks like this update breaks already-installed Python execution if its position in the PATH environment variable is after the WindowsApps folder. [1]
bash does exactly that - it has command_not_found_handle function and distributions define it, so they can offer package installation for any command not found.
Yep, I ran into this some months ago with an insider build. IIRC though, I had manually added Python to my PATH. So I just adjusted the order and kept using my existing Python install.
[1] https://devblogs.microsoft.com/python/python-in-the-windows-...