Hello @Alexander Wenger,
I'm glad that you were able to resolve your issue and thank you for posting your solution so that others experiencing the same thing can easily reference this! Since the Microsoft Q&A community has a policy that "The question author cannot accept their own answer. They can only accept answers by others ", I'll repost your solution in case you'd like to "Accept " the answer.
Issue: Cannot add YubiKey security key for a specific Entra ID account
Solution: Resolved by @Alexander Wenger.
To resolve the issue, you shortened the specific user's UPN (User Principal Name), as their original username was too long. After shortening the UPN, you were able to add the key successfully.
If you have any other questions or are still running into more issues, please let me know. Thank you again for your time and patience throughout this issue.
Please remember to "Accept Answer", so that others in the community facing similar issues can easily find the solution.
Thanks,
Raja Pothuraju.