Add image configuration for hypershift Hosted Cluster not working as expected. 

# oc get clusterversions.config.openshift.io
NAME      VERSION       AVAILABLE   PROGRESSING   SINCE   STATUS
version   4.13.0-rc.8   True        False         6h46m   Cluster version is 4.13.0-rc.8      

Always

1. Get hypershift hosted cluster detail from management cluster. 

# hostedcluster=$( oc get -n clusters hostedclusters -o json | jq -r '.items[].metadata.name')  

2. Apply image setting for hypershift hosted cluster. 
#  oc patch hc/$hostedcluster -p '{"spec":{"configuration":{"image":{"registrySources":{"allowedRegistries":["quay.io","registry.redhat.io","image-registry.openshift-image-registry.svc:5000","insecure.com"],"insecureRegistries":["insecure.com"]}}}}}' --type=merge -n clusters     
hostedcluster.hypershift.openshift.io/85ea85757a5a14355124 patched 

# oc get HostedCluster $hostedcluster -n clusters -ojson | jq .spec.configuration.image
{
  "registrySources": {
    "allowedRegistries": [
      "quay.io",
      "registry.redhat.io",
      "image-registry.openshift-image-registry.svc:5000",
      "insecure.com"
    ],
    "insecureRegistries": [
      "insecure.com"
    ]
  }
}

3. Check Pod or operator restart to apply configuration changes. 

# oc get pods -l app=kube-apiserver  -n clusters-${hostedcluster}
NAME                              READY   STATUS    RESTARTS   AGE
kube-apiserver-67b6d4556b-9nk8s   5/5     Running   0          49m
kube-apiserver-67b6d4556b-v4fnj   5/5     Running   0          47m
kube-apiserver-67b6d4556b-zldpr   5/5     Running   0          51m

#oc get pods -l app=kube-apiserver  -n clusters-${hostedcluster} -l app=openshift-apiserver
NAME                                   READY   STATUS    RESTARTS   AGE
openshift-apiserver-7c69d68f45-4xj8c   3/3     Running   0          136m
openshift-apiserver-7c69d68f45-dfmk9   3/3     Running   0          135m
openshift-apiserver-7c69d68f45-r7dqn   3/3     Running   0          136m  

4. Check image.config in hosted cluster.
# oc get image.config -o yaml
...
  spec:
    allowedRegistriesForImport: []
  status:
    externalRegistryHostnames:
    - default-route-openshift-image-registry.apps.hypershift-ci-32506.qe.devcluster.openshift.com
    internalRegistryHostname: image-registry.openshift-image-registry.svc:5000  

#oc get node
NAME                                         STATUS   ROLES    AGE     VERSION
ip-10-0-128-61.us-east-2.compute.internal    Ready    worker   6h42m   v1.26.3+b404935
ip-10-0-130-68.us-east-2.compute.internal    Ready    worker   6h42m   v1.26.3+b404935
ip-10-0-134-89.us-east-2.compute.internal    Ready    worker   6h42m   v1.26.3+b404935
ip-10-0-138-169.us-east-2.compute.internal   Ready    worker   6h42m   v1.26.3+b404935

# oc debug node/ip-10-0-128-61.us-east-2.compute.internal
Temporary namespace openshift-debug-mtfcw is created for debugging node...
Starting pod/ip-10-0-128-61us-east-2computeinternal-debug-mctvr ...
To use host binaries, run `chroot /host`
Pod IP: 10.0.128.61
If you don't see a command prompt, try pressing enter.
sh-4.4# chroot /host
sh-5.1# cat /etc/containers/registries.conf
unqualified-search-registries = ["registry.access.redhat.com", "docker.io"]
short-name-mode = ""[[registry]]
  prefix = ""
  location = "registry-proxy.engineering.redhat.com"  [[registry.mirror]]
    location = "brew.registry.redhat.io"
    pull-from-mirror = "digest-only"[[registry]]
  prefix = ""
  location = "registry.redhat.io"  [[registry.mirror]]
    location = "brew.registry.redhat.io"
    pull-from-mirror = "digest-only"[[registry]]
  prefix = ""
  location = "registry.stage.redhat.io"  [[registry.mirror]]
    location = "brew.registry.redhat.io"
    pull-from-mirror = "digest-only" 

Config changes not applied in backend.Not operator & pod restart

Configuration should applied and pod & operator should restart after config changes.