Impossible to get airtags installed due to iPhone security and lack of instructions?

Very frustrating experience being encountered trying to get my new airtags to work with my iPhone. Can anyone help?

Every time I put the airtag near the phone to set it up - I get a pop-up saying. "Upgrade your account security Airtag uses end to end encryption to keep your location information private"

But with no instructions or guidance to say what that means or how to even do that.

My iPhone 8 has iOS 14.5.1 installed. I have rebooted the phone several times. I have taken the battery out of the airtag and put it back in again. And this is the same for any of the FOUR airtags I have bought (in four-pack).

Some general info on Apple's website says to make sure FIND MY NETWORK is turned on - but as you can see from my screen shot - I do not have this option?

Can anyone help with what steps I need to take. The guidance on the apple support website is shockingly limited.