Thoughts:

I think it is due to this handling of 'ua' (user auth) in case 0 below where IPADB_USER_AUTH_HARDENED should have also be considered:
https://pagure.io/freeipa/blob/master/f/daemons/ipa-kdb/ipa_kdb_principals.c#_786

    ret = ipadb_ldap_attr_to_key_data(lcontext, lentry,
                                      "krbPrincipalKey",
                                      &res_key_data, &result, &mkvno);
    switch (ret) {
    case 0:
        /* Only set a principal's key if password auth can be used. Otherwise
         * the KDC would add pre-authentication methods to the NEEDED_PREAUTH
         * reply for AS-REQs which indicate the password authentication is
         * available. This might confuse applications like e.g. SSSD which try
         * to determine suitable authentication methods and corresponding
         * prompts with the help of MIT Kerberos' responder interface which
         * acts on the returned pre-authentication methods. A typical example
         * is enforced OTP authentication where of course keys are available
         * for the first factor but password authentication should not be
         * advertised by the KDC. */
        if (!(ua & IPADB_USER_AUTH_PASSWORD) && (ua != IPADB_USER_AUTH_NONE)) {
            /* This is the same behavior as ENOENT below. */
            ipa_krb5_free_key_data(res_key_data, result);
            break;
        }

        entry->key_data = res_key_data;
        entry->n_key_data = result;
        if (mkvno) {
            krb5_int16 kvno16le = htole16((krb5_int16)mkvno);

            kerr = ipadb_set_tl_data(entry, KRB5_TL_MKVNO,
                                     sizeof(kvno16le),
                                     (krb5_octet *)&kvno16le);
            if (kerr) {
                goto done;
            }
        }
    case ENOENT:
        break;
    default:
        kerr = KRB5_KDB_INTERNAL_ERROR;
        goto done;
    }

Upstream bug: https://pagure.io/freeipa/issue/9065

Upstream PR: https://github.com/freeipa/freeipa/pull/6161

Fixed upstream
master:
https://pagure.io/freeipa/c/35e94bee0e0da4cf43c613a5296d57f7e04b583a
https://pagure.io/freeipa/c/97d123ccccb50098e21884a0aa9d90ed017ef97e

Fixed upstream
ipa-4-9:
https://pagure.io/freeipa/c/6d70421f57d0eca066a922e09416ef7195ee96d4
https://pagure.io/freeipa/c/294ae35a61e6ca8816b261c57508e4be21221864

Verified
ipa-server-4.9.8-6.module+el8.6.0+14224+4c38d4ea.x86_64

Passed	test_integration/test_krbtpolicy.py::TestPWPolicy::()::test_krbtpolicy_password_and_hardended
------------------------------ Captured log setup ------------------------------
transport.py               391 INFO     RUN ['kinit', 'admin']
transport.py               513 DEBUG    RUN ['kinit', 'admin']
transport.py               558 DEBUG    Password for admin: 
transport.py               217 DEBUG    Exit code: 0
------------------------------ Captured log call -------------------------------
transport.py               391 INFO     RUN ['ipa', 'user-mod', 'testuser1', '--user-auth-type', 'password', '--user-auth-type', 'hardened']
transport.py               513 DEBUG    RUN ['ipa', 'user-mod', 'testuser1', '--user-auth-type', 'password', '--user-auth-type', 'hardened']
transport.py               558 DEBUG    -------------------------
transport.py               558 DEBUG    Modified user "testuser1"
transport.py               558 DEBUG    -------------------------
transport.py               558 DEBUG      User login: testuser1
transport.py               558 DEBUG      First name: test
transport.py               558 DEBUG      Last name: user
transport.py               558 DEBUG      Home directory: /home/testuser1
transport.py               558 DEBUG      Login shell: /bin/sh
transport.py               558 DEBUG      Principal name: testuser1
transport.py               558 DEBUG      Principal alias: testuser1
transport.py               558 DEBUG      Email address: testuser1
transport.py               558 DEBUG      UID: 15200003
transport.py               558 DEBUG      GID: 15200003
transport.py               558 DEBUG      User authentication types: password, hardened
transport.py               558 DEBUG      Account disabled: False
transport.py               558 DEBUG      Password: True
transport.py               558 DEBUG      Member of groups: ipausers
transport.py               558 DEBUG      Kerberos keys available: True
transport.py               217 DEBUG    Exit code: 0
transport.py               391 INFO     RUN ['ipa', 'config-mod', '--user-auth-type', 'password', '--user-auth-type', 'hardened']
transport.py               513 DEBUG    RUN ['ipa', 'config-mod', '--user-auth-type', 'password', '--user-auth-type', 'hardened']
transport.py               558 DEBUG      Maximum username length: 32
transport.py               558 DEBUG      Maximum hostname length: 64
transport.py               558 DEBUG      Home directory base: /home
transport.py               558 DEBUG      Default shell: /bin/sh
transport.py               558 DEBUG      Default users group: ipausers
transport.py               558 DEBUG      Default e-mail domain: testrelm.test
transport.py               558 DEBUG      Search time limit: 2
transport.py               558 DEBUG      Search size limit: 100
transport.py               558 DEBUG      User search fields: uid,givenname,sn,telephonenumber,ou,title
transport.py               558 DEBUG      Group search fields: cn,description
transport.py               558 DEBUG      Enable migration mode: FALSE
transport.py               558 DEBUG      Certificate Subject base: O=TESTRELM.TEST
transport.py               558 DEBUG      Password Expiration Notification (days): 4
transport.py               558 DEBUG      Password plugin features: AllowNThash, KDC:Disable Last Success
transport.py               558 DEBUG      SELinux user map order: guest_u:s0$xguest_u:s0$user_u:s0$staff_u:s0-s0:c0.c1023$sysadm_u:s0-s0:c0.c1023$unconfined_u:s0-s0:c0.c1023
transport.py               558 DEBUG      Default SELinux user: unconfined_u:s0-s0:c0.c1023
transport.py               558 DEBUG      Default PAC types: MS-PAC, nfs:NONE
transport.py               558 DEBUG      Default user authentication types: password, hardened
transport.py               558 DEBUG      IPA masters: master.testrelm.test
transport.py               558 DEBUG      IPA master capable of PKINIT: master.testrelm.test
transport.py               558 DEBUG      IPA CA servers: master.testrelm.test
transport.py               558 DEBUG      IPA CA renewal master: master.testrelm.test
transport.py               558 DEBUG      IPA DNS servers: master.testrelm.test
transport.py               217 DEBUG    Exit code: 0
transport.py               391 INFO     RUN ['ipa', 'krbtpolicy-mod', 'testuser1', '--hardened-maxlife', '600']
transport.py               513 DEBUG    RUN ['ipa', 'krbtpolicy-mod', 'testuser1', '--hardened-maxlife', '600']
transport.py               558 DEBUG      Max life: 86400
transport.py               558 DEBUG      Hardened max life: 600
transport.py               217 DEBUG    Exit code: 0
transport.py               391 INFO     RUN ['kdestroy', '-A']
transport.py               513 DEBUG    RUN ['kdestroy', '-A']
transport.py               217 DEBUG    Exit code: 0
transport.py               391 INFO     RUN ['kinit', 'testuser1']
transport.py               513 DEBUG    RUN ['kinit', 'testuser1']
transport.py               558 DEBUG    Password for testuser1: 
transport.py               217 DEBUG    Exit code: 0
transport.py               391 INFO     RUN klist | grep krbtgt
transport.py               513 DEBUG    RUN klist | grep krbtgt
transport.py               558 DEBUG    02/23/2022 12:47:10  02/23/2022 12:57:10  krbtgt/TESTRELM.TEST
transport.py               217 DEBUG    Exit code: 0
transport.py               391 INFO     RUN ['kdestroy', '-A']
transport.py               513 DEBUG    RUN ['kdestroy', '-A']
transport.py               217 DEBUG    Exit code: 0
transport.py               391 INFO     RUN ['kinit', 'testuser2']
transport.py               513 DEBUG    RUN ['kinit', 'testuser2']
transport.py               558 DEBUG    Password for testuser2: 
transport.py               217 DEBUG    Exit code: 0
transport.py               391 INFO     RUN klist | grep krbtgt
transport.py               513 DEBUG    RUN klist | grep krbtgt
transport.py               558 DEBUG    02/23/2022 12:47:10  02/24/2022 11:51:49  krbtgt/TESTRELM.TEST
transport.py               217 DEBUG    Exit code: 0

http://idm-artifacts.usersys.redhat.com/mvarun/trigger//3929/test-suite/report.html.gz
Based on the test result, marking the bug VERIFIED.

Since the problem described in this bug report should be
resolved in a recent advisory, it has been closed with a
resolution of ERRATA.

For information on the advisory (idm:client and idm:DL1 bug fix and enhancement update), and where to find the updated
files, follow the link below.

If the solution does not work for you, open a new bug report.

https://access.redhat.com/errata/RHEA-2022:1884