Comment 3 for bug 2060897

So this outcome is not limited to xubuntu. I was able to produce the same result with the base desktop ISO as well.

The key here is a "deadnet" type configuration - active networking but not going anywhere.
I was however able to make the install work on the deadnet by setting the autoinstall policy
apt: {fallback: offline-install}

The code equivalent of that is a proof-of-concept that I think is overdue to make real, in https://github.com/canonical/subiquity/pull/1816, except I think server wants this default also and that PR applies this policy value change to desktop.