After doing some digging, I found that the issue is related to what gets pushed into the LDAP configuration store. I have a case opened with VMware tech support and will update this when I get an official resolution. In the meantime I have figured out a solution.
1. Install the agent as usual with the usual command line option /v"VDM_VC_MANAGED_AGENT=0".
2. When you log back into VMware View (admin), the desktop will show as an RDS Host with a configuration error for the status. This is expected.
3. From the VMware View connection server open ADSIEdit and connect to the following location: ldap://127.0.0.1/dc=vdi,dc=vmware,dc=int
4. Navigate to the OU=Servers folder
5. Locate the Windows 2016 entry. Double click on each entry and find the server by the <description> or <ipHostNumber>.
6. Once you find the right entry, modify the attribute <pae-Server-In-DesktopMode>. This needs to be set to a value of 1.
7. Reboot the Windows 2016 desktop.
