I've never used Set-AzureVMAccessExtension, but I've used the Az PowerShell equivalant Set-AzVMAccessExtension. It needs you to pass -Credential $Credential instead of -UserName and -Password.
You can try this script I made a while ago to to reset passwords for Azure VMs:
# Replace these values with your own
$resourceGroupName = "Servers-RG"
$vmName = "server1"
# Get the VM into an object
$vm = Get-AzVM -ResourceGroupName $resourceGroupName -Name $vmName
# Store credentials you want to change
$credential = Get-Credential -Message "Enter your username and password for $vmName"
# Store parameters in a hashtable for splatting
# Have a look at https://learn.microsoft.com/en-us/powershell/module/microsoft.powershell.core/about/about_splatting?view=powershell-7
$extensionParams = @{
'VMName' = $vmName
'Credential' = $credential
'ResourceGroupName' = $resourceGroupName
'Name' = 'AdminPasswordReset'
'Location' = $vm.Location
}
# Pass splatted parameters and update password
Set-AzVMAccessExtension @extensionParams
# Restart VM
# Don't need to pass any switches since they are inferred ByPropertyName
# Have a look at https://learn.microsoft.com/en-us/powershell/module/microsoft.powershell.core/about/about_pipelines?view=powershell-7
$vm | Restart-AzVM
I found that the password update doesn't happen until you restart the VM, so Restart-VM is required.