- @Acedan - I am not sure, you have completed Step 1 below. Please check and let me know.
Cloud trust enabled with two steps for on-prem access
- first at your AD -create Kerberos server keys to issue TGT from cloud and to be accepted at you AD. (don't test with user account AD protected group. Normal user in AD without any AD privilege groups works)
https://learn.microsoft.com/en-us/azure/active-directory/authentication/howto-authentication-passwordless-security-key-on-premises#install-the-azure-ad-kerberos-powershell-module - Enable policy for end clients (GPO for HAADJ or Intune policy for AADJ/HAADJ) to trigger Cloud trust.
PS: Users are already in "Key trust" would automatically migrate to "Cloud trust" once enabled. if you have had certificate trust , you need to delete and re-provision for cloud trust