@Matic Hi and welcome to the Forum 
There is this post about the same error https://forums.rancher.com/t/failed-to-connect-to-peer-wss-10-42-0-22-v3-connect-local-id-10-42-1-15-websocket-bad-handshake/20529/7, however I have RKE2 running on one node with one replica (bare-metal and openSUSE MicroOS), sure you want three?
I also set the following option to the rancher install as well as set the version (this also applies to cert-manager version).
--set global.cattle.psp.enabled=false