I have successfully created the Self Hosted Integration Runtime and it is showing up and running in ADF as well.
However when I try to create a linked service to connect to SQL database on the on prem system - I am getting the below error:
Cannot connect to SQL Database: '(localdb)\mssqllocaldb', Database: 'XXXX', User: 'XXXXX'. Check the linked service configuration is correct, and make sure the SQL Database firewall allows the integration runtime to access. Cannot open database "XXXX" requested by the login. The login failed. Login failed for user 'NT SERVICE\DIAHostService'., SqlErrorNumber=4060,Class=11,State=1..