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I too have problems with the New-PowerBIReport command when connecting using an Service Principal. I tried with my own account and same report and it works just fine.
This seems to be an issue only when the report is connected to a Power BI Dataset using the XMLA-endpoints (Analysis Service Connection).
If the report is connected to the same dataset with "Get Data from existing Power BI Dataset/Semantic Model", then the powershell command works just fine.
This must be an bug in either the powershell cmdlet or in the underlying API POST Import in group.
While uploading new report using New-PowerBIReport command, I am getting error code 401 (Unauthorized).
Datasource settings are as follows.
Deployment of same report works fine if I use SSAS hosted onprem.
I am using a SP that has admin permission on the workspace and the admin API's are enabled
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