"Network Extension" does not appear in the Capability section in Xcode

If you highlight your main app target and select its capabilities, you should see the option. Perhaps the extension that is highlighted cannot support an embedded extension, hence the short list of capabilities available to it.

What else should I check to resolve these issues? there are no restrictions on individual developer accounts?

I recommend that you bookmark the Developer Account Helper > Reference > Supported capabilities (iOS) page (or the equivalent for the actual platform you’re targeting). It has a table that shows which capabilities are available to which team types. I suspect you’re using a Personal Team (the Apple Developer column) and that’s why you can’t use NE.

If you are using a Personal Team, be aware that it has other significant limitations. For the details, see Developer > Support > Choosing a Membership.

Share and Enjoy
—
Quinn “The Eskimo!” @ Developer Technical Support @ Apple
let myEmail = "eskimo" + "1" + "@" + "apple.com"