With the current (version) of the Team Services Agent Extension, it is required to specify the Team Project and the Resource Group. Therefore it is not possible to use this extension as a normal/generic build agent where just only the Agent Pool should be specified.
Is that something you deliberately don't support? Because as far as I found out it worked that way before. If I'm correct the extension itself isn't open source?

@RoopeshNair Can you help answer this question?
BWT, is there a repository for this extension? so forks can log issue in there.
@riezebosch - Your inference is right, the extension configures only deployment group agent. It has been that way since the beginning. We never added support for build & release agent configuration via this agent.
@TingluoHuang - I don't think the extension code is public. @sachinma for confirmation
You are right @RoopeshNair, it is not public as of now. We can discuss if we should make it public
@sachinma @RoopeshNair it would be great if there is a place users can leave feedback or report issues for the extension, so far most customer leave their feedback or issue in the agent repository which is not really the right place. :D
Plus we could make our own extension based on the work you already did. 馃帀
Hi, sorry for re-opening this old discussion but i had the same problem with a client today. The extension description is really misleading, saying that Build and Release Agent capabilities will be installed but that's FALSE. Please, change the extension description!!!
What is a recommended way to provision a VM with Build Agent in Azure? Is it possible to create an ARM template that creates a VM with Build Agent installed and adds the Build Agent into the Agent Pool?
You can use custom script extension (Windows | Linux) of ARM template and configure the build agent in unattended mode
What is a recommended way to provision a VM with Build Agent in Azure? Is it possible to create an ARM template that creates a VM with Build Agent installed and adds the Build Agent into the Agent Pool?
Not recommended per se but you can get some inspiration from here: https://github.com/Azure/azure-quickstart-templates/tree/master/vsts-fullbuild-ubuntu-vm
It currently is outdated but you can inspect my PR here: https://github.com/Azure/azure-quickstart-templates/pull/5470
We are updating the description to make it clear that the extension is for Deployment Groups only