Earlier quoted context omitted.
Using a physical key in Windows now requires you to enter the pin to unlock your Yubikey (or set a pin) before you can use it to register. This is an issue we've run into a lot at $work where users will forget their FIDO2 pin cause its only used during registration, and never after that, and when they reset the pin it destroys all their previous known 2FA (which is expected). This is a new requirement from Microsoft.
I'm aware about this requirement, and it makes sense. Obviously, I want the authenticator device protected, so I must know the device PIN or password to unlock it. It's exactly the same for Windows Hello built-in authenticator, they require a PIN (or face, or whatever other means you have configured) for the computer itself. Same for iPhones, you need a PIN or password to unlock it. It's merely a matter of frequency…
See, pins for yubikeys don't make much sense to me. If you have to enter a PIN and press the button on a token, that doesn't seem very different to entering a password and pressing the button a token which U2F has offered for years.