So I just revisited this today while adding a new server. There may be a few prerequisite steps, as defined in https://learn.microsoft.com/en-us/entra/identity/devices/howto-vm-sign-in-azure-ad-windows, namely
Add the "Virtual Machine Administrator Login" role to each VM in Azure|Security>Identity : System assigned - Permissions [Azure role assignments]
Edited IAM for the resource group that contains the VMs, adding role "Virtual Machine Administrator Login" for my defined Entra group of admins.
I then tested with mstsc.exe and "Select Use a web account to sign in to the remote computer option in the Advanced tab. This option is equivalent to the enablerdsaadauth
RDP property." This required I create an FQDN to the private IP of the VM. I was then able to connect without any declare username.
Yet the name restriction does not seem to exist with RDCMan. I am using v2.93, and am able to connect with an IP and a completely blank credentials tab (I also tried with azuread<fullname> and my UPN 'email' name - both worked, but guess that's expected if you can leave it blank!)
However, some of my VMs throw an error after I provide my PIN, saying NLA is required but my DC couldn't be contacted. Seems there are variations of security (or base image of Azure VMs?) I'll keep working on this...