Let me clean-up these cells for better readability:

%pip install databricks-sdk --upgrade

dbutils.library.restartPython()

from databricks.sdk import WorkspaceClient
from databricks.sdk.service import catalog

w = WorkspaceClient()

# This works without issue. The location is owned by me when created.
external_location_create = w.external_locations.create(
    name="external_location_name",
    credential_name="xxx",
    comment="Source Data",
    url="abfss://source-data@yyy.dfs.core.windows.net"
)

# This does not work. I get the PermissionDenied error.
external_location_update = w.external_locations.update(
    name="external_location_name",
    owner="Zzz Metastore Administrators",            
    isolation_mode=catalog.IsolationMode.ISOLATION_MODE_ISOLATED
)

# This does work if I remove the isolation_mode line.
external_location_update = w.external_locations.update(
    name="external_location_name",
    owner="Zzz Metastore Administrators"
)

# This also fails with the PermissionDenied error.
external_loc_bind = w.workspace_bindings.update_bindings(
    securable_type=catalog.UpdateBindingsSecurableType.EXTERNAL_LOCATION,
    securable_name="external_location_name",
    add=[(catalog.WorkspaceBinding(binding_type=catalog.WorkspaceBindingBindingType.BINDING_TYPE_READ_WRITE, workspace_id=1111111111111111))]
 )