Solved: SSH private key error "Fail Permission Denied"

Windows Version 2024.3.16.0 (October 29, 2024)
When creating SSH Shell session I use SSH key -> File (local) and point to my local ssh key file, everything works and I can open an SSH session / terminal, no problem.
If I create SSH key first as a separate entry and then try to use it instead of the local file, I get:
unexpected error occurred. Error: "Fail Permission Denied"
When creating SSH key, I tried all 3 available entries: 1) embedded (copy/paste my private/public key), 2) from local file (point to the the same local file from above) and 3) my personal ssh key (which seems to me a repeat of the first two as t has both embedded and local file both there).
Please, advise.