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Seamless SSO According to MS Support
Microsoft’s official documentation indicates that Azure Virtual Desktop (AVD) Single Sign-On (SSO) with Microsoft Entra ID is supported; however, in hybrid environments the experience is not fully seamless. Even with SSO enabled, you may still encounter credential prompts when initiating a session host, depending on the authentication flow and whether passwordless or token-based sign-in methods are in place.
Connect to Azure Virtual Desktop | Azure Docs
I have not come across any documentation that specifically states that seamless SSO is unsupported in a hybrid environment.
In the document Configure single sign-on for Azure Virtual Desktop using Microsoft Entra ID - Azure Virtual Desktop | Microsoft Learn
It does state that;
If you enable single sign-on on Microsoft Entra hybrid joined session hosts without creating a Kerberos server object, one of the following things can happen when you try to connect to a remote session:
You receive an error message saying the specific session doesn't exist.
Single sign-on will be skipped and you see a standard authentication dialog for the session host.
To resolve these issues, create the Kerberos server object, then connect again.
So this tells me if I meet the required criteria, I can have seamless sso.