This fails completely even at small scale when the script is interrupted before finishing.

The difference between just using some Python vs Terraform is idempotency. TF isn’t going to touch the nodes the script succeeded on; if you have to start your for-loop script it will, which may not be desirable.

Frankly these days configuration management is a bit dated…

You’re much better off in most cases using a tool like Packer with whatever system you want to bake an image, then use a simple user-data script for customization.

It’s very hard to scale continuous config management to thousands of servers.