Headless mode incompatibility with recent window attaching

[sasuntolayan]

Windows Terminal version

1.20.11781.0

Windows build number

10.0.22631 Build 22631

Other Software

No response

Steps to reproduce

Enable the headless mode via the settings json. ("compatibility.allowHeadless": true)
Set "New instance behavior" setting to one of the attaching to the most recently used window options.
Run the Terminal and close all windows to put it to the headless mode.
Try to start a new instance.

Expected Behavior

It should detect that there are no active windows to attach, and start a new instance.

Windows.Terminal.Bug.Report.mp4

Actual Behavior

No actual Terminal instance is properly created. It looks like it is attempting to create one but fails.

[michaelarnauts]

This is indeed a bug, it's also explained here: #17360