To fix the problem, run commands in powershell to set the licensing server properly on the rd session host using the WMI CIM provider:
$obj = gwmi -namespace “Root/CIMV2/TerminalServices” Win32_TerminalServiceSetting
Then, go into the registry and manually set the licensing mode:
HKLM\SYSTEM\CurrentControlSet\Control\Terminal Server\RCM\Licensing Core\LicensingMode
You need to change the DWORD to 2 for Per Device or 4 for Per User.
Next, reboot the system. The changes made previously will report everything properly and the RDS host will now recognize the licensing configuration.