Yes, unfortunately Live Translate with AirPods is currently an iPhone-only feature and does not work on iPad. The error message you're seeing is essentially Apple confirming this limitation.
The reason comes down to how Apple has architected the feature. Live Translate relies on the AirPods' microphones working in coordination with the iPhone's Neural Engine and the phone's cellular or Wi-Fi radio for low-latency processing. While the iPad Pro M5 is powerful enough to run Apple Intelligence features, Apple has not extended Live Translate to work with iPad at this time. The Shortcuts action for Live Translate is simply not supported on iPadOS in the current release.
This is a software limitation rather than a hardware one, and it has been the case since the feature launched. Apple has not publicly explained why it is restricted to iPhone, but it is a known constraint that many users have run into.
The best workaround right now is to use an iPhone paired with the AirPods Pro 3 for any Live Translate sessions. If you want to give Apple feedback requesting iPad support, you can submit it through the Feedback Assistant app (feedbackassistant.apple.com), which is the official channel for feature requests that Apple's engineering teams review.