We are experiencing the same problem with Windows 10 2004 and 20H2:
- Despite SSO enabled the user gets presented a password prompt saying "Action needed"
- The user can enter ANY password to successfully connect
- Initiating the connection from the command line with "rasdial" works with SSO
- No changes on the server side and no errors logged on the server
It seems to be a GUI problem as it only occurs when initiating the connection from the GUI. I have raised a pay per incident support ticket with Microsoft yesterday and am waiting for their response now. I've also linked this thread within my ticket.
Michael