Under my back log dropdown I have both "User Story" and "Bug" listed in Visual Studio Online (VSO), I think that list is customizable, at any rate it was working, and as of 7/12 it is no longer working. Also another interesting item is the “Create a work item” task in Flow is listing “UserStory” instead of “User Story” (with a space). The actual VSO WebApi requires the type to have a space, so this appears to be wrong from the onset, which I am loading the type with a dynamic in my Flow anyway. Basically the error I get when the flow fails is “Invalid Request” with a request ID, which is less than helpful, and not exactly Restful, but I digress.
I agree something in preview shouldn't probably be used in production, but we are a small dev firm and I just didn't have the time to write my own interface around it. I have however made some progress today with a workaround to the issue. Basically all work item types create successfully except "User Story". So what I have done is created a “Feature” work item type instead of “User Story”. Then I have a PowerShell script which runs every so often and changes the “Features” to “User Stories” via the VSO WebApi. Kind of a convoluted workaround, but at least it works for us.