Yes, sadly, iTunes and more specifically, iCloud for Windows, has not yet been updated to support security keys for 2FA. Sad thing is that most browsers support security keys for 2FA, so if you're an Apple Music subscriber, you're better accessing your iTunes library on a 2FA supported browser and going to music.apple.com until Apple hopefully updates their apps for 2FA support. Not sure if music.apple.com works for those not subscribed to Apple Music, but it is worth a try attempting a login just to see if you can still do things you'd be able to do on iTunes. [Edit: What you see on music.apple.com tends to line up with what you see on your iPhone/iPad. So it will not be like your iTunes library. But if you sync your devices, then it shouldn't be too much of a problem. Lack of smart playlists not showing up is the only real issue. But if you have an Apple device, you can do what I do, just export the smart playlist to a new playlist on your device and that will automatically create a normal playlist that will also show on the web player (may need to refresh page to see it on the left side, or just select that playlist from All Playlists).]
Not going to lie, I think Apple has been slowly (and quietly) trying to push the use of their web player since it works on both Mac and Windows (and other operating systems) without having to try to code for the multitude of operating systems out there. I think they've sort of gone the route of Amazon Music and Spotify, and rarely bother updating the app, but focus more on the browser side and the layout of their services, as well as trying to feature more things that may interest users.
