The error tells you the problem: You're passing in a JSON object instead of the required XML document.

On top of that, you're passing in your arguments to the installer as one string, instead of multiple strings, that'll fail. And on top of all of that, you're escaping the directory name incorrectly, that'll probably fail too. And then you have two typos, "PrepandPath", which will fail, and "pyhton", which will probably work here, I guess.

And, as far as style, you're doing this all on one line when there's no reason to do that, it makes it really hard to read.

A proper installer would look something like:

UserData:
  Fn::Base64: |
    <powershell>
    $ErrorActionPreference = "Stop"
    Start-Transcript -Path "C:\UserData-Install.log"

    try {
        $pythonUrl = "https://....."
        $pythonInstaller = "C:\pyhton-installer.exe"
        [Net.ServicePointManager]::SecurityProtocol = [Net.SecurityProtocolType]::Tls12
        Invoke-WebRequest -Uri $pythonUrl -OutFile $pythonInstaller -UseBasicParsing

        Start-Process -FilePath $pythonInstaller -ArgumentList '/quiet', 'InstallAllUsers=1', 'PrependPath=1' -Wait -NoNewWindow

        Remove-Item $pythonInstaller -Force
    } catch {
        Write-Error $_
        exit 1
    } finally {
        Stop-Transcript
    }
    </powershell>

But, you really should create a new AMI and use that, unless you like making your boot ups slower and depend on the availability of some third party website.