When we configure a MC with an OSImage that cannot be pulled, the pools are not degraded as they should be.

We can see the logs in the MCDs telling that the pool will be marked as "Degraded", but instead it is marked as "Working".

E0525 10:36:49.013820  201317 writer.go:200] Marking Degraded due to: Error checking type of update image: failed to run command podman (6 tries): [timed out waiting for the condition, running podman pull -q --authfile /var/lib/kubelet/config.json quay.io/openshifttest/tc-54054-fake-image:latest failed: Error: initializing source docker://quay.io/openshifttest/tc-54054-fake-image:latest: reading manifest latest in quay.io/openshifttest/tc-54054-fake-image: name unknown: repository not found
: exit status 125]
I0525 10:36:49.023498  201317 daemon.go:510] Transitioned from state: Done -> Working

4.12.0-0.nightly-2023-05-24-182756

Always. Sometimes, after 20 or 40 minutes the pools are degraded, sometimes not.

1. Create these MCs

kind: MachineConfig
apiVersion: machineconfiguration.openshift.io/v1
metadata:
  labels:
    machineconfiguration.openshift.io/role: "master"
  name: "fake-image-tc54054-master"
spec:
  osImageURL: "quay.io/openshifttest/tc-54054-fake-image:latest"

---

kind: MachineConfig
apiVersion: machineconfiguration.openshift.io/v1
metadata:
  labels:
    machineconfiguration.openshift.io/role: "worker"
  name: "fake-image-tc54054-worker"
spec:
  osImageURL: "quay.io/openshifttest/tc-54054-fake-image:latest"



2. Wait for the nodes to be degraded

In MCDs logs we can see that the MCD reports that the pool should be degraded, but instead of setting state=Degraded, it does state=Working


E0525 10:36:49.013820  201317 writer.go:200] Marking Degraded due to: Error checking type of update image: failed to run command podman (6 tries): [timed out waiting for the condition, running podman pull -q --authfile /var/lib/kubelet/config.json quay.io/openshifttest/tc-54054-fake-image:latest failed: Error: initializing source docker://quay.io/openshifttest/tc-54054-fake-image:latest: reading manifest latest in quay.io/openshifttest/tc-54054-fake-image: name unknown: repository not found
: exit status 125]
I0525 10:36:49.023498  201317 daemon.go:510] Transitioned from state: Done -> Working

The pool should be degraded when, after all the retries, we can't pull the osImage.

This problem does not happen in 4.13 and 4.14.

It looks like that randomly the pools can be degraded eventually. Or not (I haven't waited longer that 40 minutes or so)

A must gather with a try waiting 25 minutes aprox. is linked in the first comment of this issue.

The issue is very similar to: https://issues.redhat.com/browse/OCPBUGS-3001