From the project setting, there is a post compiling command:
echo "${OsType}" | grep -q win* && py -3 "../scripts/dk6_image_tool.py" -s 294912 ${ENV_IMAGE_TOOL_OPTS} ${BuildArtifactFileName} || python3 "../scripts/dk6_image_tool.py" -s 294912 ${ENV_IMAGE_TOOL_OPTS} ${BuildArtifactFileName}
So clearly it asks for Python 3. Not Python 2.7. This is a good thing I think because python 2.x is phasing out.
I guess the documentation is not up-to-date because it still asks us to install 2.7.
As for you issue I have no clue too. The command asks for either "py" or "python3". But in your screenshot you only showed "python -v" Could that be somehow you only have python.exe but not python3.exe available in your environment?