Microsoft has a KB article on this error message:
One of the notes in the KB articles states:
Note: If the SoftGrid Virtual Application Server is version 3.x, the DNS host name must contain the NetBIOS name.
I suspect this note should say:
Note: If the SoftGrid Virtual Application Server is version 3.x or greater, the DNS host name must contain the NetBIOS name.
As when we used the FQDN on our Management Server for the Default group we got this error message. When we changed it to the NetBIOS name the error was successfully resolved and did not reappear.
I was able to confirm using procmon that when starting the AppV Server Management Service that it queried this registry key:
to set the computer name. This key contains the NetBIOS name.