It turns out I was doing it wrong due to me being new to CloudFormation.
For anyone else looking into how to attach both managed and inline policies to a user at the moment of user creation, this is how I do it which incidentally is pretty well documented by the AWS folks:
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Initially, I though no it does not make sense to use Terraform to create the infra structure to run Cloud Formation script to do create resources you can do using Terraform.
If you are experience in Terraform and use it for your other infrastructure, it does not make sense to introduce another way of doing it,
The only reason I could see to create the Cloud ...