Is Active Directory Based Authentication supported instead of KMS?
What do you mean? Can you please explain in detail? Do you have questions about authentication, or for licensing the OS/Office?
Can AD based activation be used to activate Windows 10 desktops and Office 2016 delivered via Instant Clone desktops, or is KMS still required?
The documentation for Horizon 7.4 only mentions KMS.
If you use Office 365 (Click-to-Run) you can assign licenses to users, you do not have to use a KMS server
See: Overview of licensing and activation in Office 365 ProPlus | Microsoft Docs
Natively installed Office 2016 application and Operating Systems need a KMS server (or MAK) to be activated.
"Natively installed Office 2016 application and Operating Systems need a KMS server (or MAK) to be activated."
Why? I understand why MAK keys aren't supported, but why would VDI care about Active directory authentication vs KMS based authentication.
Unless you disable it via the registry (the unsupported workaround to allow MAK keys) the agent activates Windows as part of the deployment process. Not sure if this happens in the master or in each individual desktop in instant clone, but with traditional composer linked clones the deployment will fail if KMS activation of the OS fails.