I'm glad that you were able to resolve your issue and thank you for posting your solution so that others experiencing the same thing can easily reference this! Since the Microsoft Q&A community has a policy that "[The question author cannot accept their own answer. They can only accept answers by others] (https://docs.microsoft.com/en-us/answers/support/accepted-answers#why-only-one-accepted-answer)**)", I'll repost your solution in case you'd like to "[Accept] (https://docs.microsoft.com/en-us/answers/support/accepted-answers#accepted-answer-in-a-question-thread)**)" the answer.
Issue:
MFA policy is misconfigured. Error: Work with your admin to enable notification through mobile app in the policy.
Solution:
- User was created in Tenant A where MFA is enabled via per user MFA with limited sign-in option. Configuration will not allow user by prompting MFA. User has to enter OTP manually.
- The same User has been invited as guest to tenant B, where you have conditional access policies for MFA.
For your case, Tenant A per user MFA policies were causing issues. post removing MFA restriction on Tenant A issues were resolved.
Please "Accept the answer" if the information helped you. This will help us and others in the community as well.