After more troubleshooting I found that it is not just the RDP client. It also shows the same message if you get redirected to authenticate with out ADFS server. You are unable to enter any credentials. The only workaround that I have found is to Open Credential Manager and add my credentials there.
It does work with no writable attached? What happens if you attach with UIA writable only? And what version of Appvolumes are you using? Also, when starting this issue coming up, after upgrading the Appvolumes agent? Or has this issue been there always?
We had recently upgraded to App Volume version 2.14 from 2.12. I updated the agents on the master VM and created new pools. I noticed that the writables were still using the 2.12 template so I updated those to the 2.14 templates. That's when this issue started. I rolled back the agent to 2.12 and everything started working again. Installed 2.14 and it broke. I upgraded to 2.15 and everything is working perfectly. Not sure what happened but there is some kind of bug with 2.14.2.