Jamian in Dell Engineering had previously escalated this after my postings here, and confirmed it was unlikely either Dell nor Microsoft are going to do anything to remedy this. The mitigation is finally being patched/expiring on Aug 9 2022 next week per that microsoft kb i posted last year, above.
Jaiman had suggested trying Win Server 2022 to see if that would remedy the problem, but alas, after building one out, it does not. Still works fine with username & password, just not with Yubikey smartcard.
Any other suggestions to keep using smartcards with RDP here would be very appreciated. : )