Is 2 Factor Authentication mandatory for Airtag use?

It requires 2 Factor Authentication. From the article below.

Apple has focused heavily on the privacy and security aspects of AirTag, which is why it has made it mandatory for all users to turn on the Two-Factor Authentication. To turn on Two-Factor Authentication or 2FA, first, go to Settings and tap on your Apple ID at the top. Now, go to ‘Password & Security.’ Tap on ‘Two-factor authentication’ to start the procedure. You will need to enter your phone number to complete the authentication process. 

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Ziatron wrote:

I have heard too many nightmare stories about people being locked out of their Apple products or more commonly, people continually getting authentication codes for the same device, on the same day. I have a friend that says he is sent a authentication code every time he wants to watch a movie on his Apple TV. Others say they get authentication codes several times every day.

That would indicate that people haven't set up 2FA properly or are misunderstanding something. Problems can happen but you're using what are rare events (that, in many cases you can't even verify) as a reason to make a decision.

But, it is up to you.

Ziatron wrote:

When you don't use two factor authentication Apple FORCES all of your Apple devices to share their Focus settings. The sharing cannot be turned off. This means, the only way I can silence my iPhone is with the switch on the side.

I have no way of testing that but I'm dubious. However, given that it is true, it sounds like another good reason to use 2FA.

You mentioned in your post above that people might not be setting up two factor authentication correctly. How can this be? As I understand it, you simply "turn it on" I don't see how someone could use it incorrectly.

You need to select which of your devices are listed as trusted devices. You need to have alternate trusted numbers. You need to understand that if you regularly clear cookies, browsers marked as trusted will need to be re-authenticated. You need to not share an Apple ID. And, most importantly, you need to not just assume that, because some people have claimed that 2FA is a nightmare that that is accurate.