I'm also facing this...unfortunate that it isn't solved.

UPDATE: So it seems that the reason this is failing is because the Family Controls entitlement is required by the DeviceActivityReport Extension as well. When I add the development entitlement back to that, it works properly. The ActivityMonitorExtension also seems to require the capability in order to work properly. Had to send 2 new capability requests...

Another question I have for the engineer is do I need to worry about getting the distribution capability version for my DeviceActivityReportExtension through the request process? Or is it fine if just my main app has the distribution capability.

I realized what the issue was. I had another file using the DeviceActivityReportExtension somewhere in my code that was configured incorrectly. That view was never being shown, so I thought it wouldn't impact anything. But deleting that view actually made the original DeviceActivityReportExtension show up.

I already completed the request process and was granted access to the Distribution version of the capability for my app. That's why I now have the mismatch between versions, since my main app is using the Distribution version while my DeviceActivityReportExtension uses the development version.