So I went through the motions with Microsoft Support
In my case I was trying to get the user to log into their PC using their Microsoft account and not a local account.
The situation was actually very simple. You simply choose other user and enter the person's Microsoft 365 credentials directly on the login screen!
This worked first time
Next step is to then create another local account
Log in with that one
Then do a profile move
To move the user settings and file from one account to another;
- Go to Control panel> System> Advanced system settings. Click on the Settings button under user profiles
- Select the user account from which you want to copy the settings
- Click Copy to, and then enter the name of, or browse to, the profile you want to overwrite. This will usually be in C:\Users\username, where username is the name of the profile to which you are copying.
- Click Permitted to use, and then add all user accounts to which you want to give full profile control.
- Click OK.
I haven't done the profile move yet but I know it does work from past experience.
Not sure why you can't just add the account. I was informed by Microsoft to confirm if the machine was AzureAD joined but I think that's a different scenario.
Hopefully this solves the issue for others!