After burning way too many hours looking for an answer I decided to actually solve my own problem.

Root cause appears to be that xorgxrdp is no longer included in the distro. I've tested this on WSL and HyperV on Win10 with success.

Start off with getting everything up to date and tweak the listening port for xrdp:
apt-get update && apt-get upgrade && apt-get dist-upgrade
apt-get install kali-desktop-xfce xorg xrdp
sed -i 's/port=3389/port=3390/g' /etc/xrdp/xrdp.ini #Critical that you do this up if you are WSL if 3389 is in use
Next we need to get some tools and build xorgxrdp
apt-get install git autoconf automake libtool pkg-config nasm gcc make xserver-xorg-dev
cd xorgxrdp
make install

Last step needed is to tweak /etc/xrdp/

Comment out the last two lines in the file
#test -x /etc/X11/Xsession && exec /etc/X11/Xsession
#exec /bin/sh /etc/X11/Xsession
and add

start xrdp
/etc/init.d/xrdp start

Run mstsc.exe and point to if on WSL, or IP of guest vm and configured port of choice.

Hope this helps.