Testing with only the AVAudioCapture API also did not work.
But as I was testing, I discovered the following:
If I set the default audio device after starting the session instead of before starting the session, then audio is working with Sequoia.
In the sample application, when moving setDefaultAudioDevice on line 103 down past [session startRunning], then I see audio values and hear audio via the loopback:
...
// Start the session
[session startRunning];
setDefaultAudioDevice(audioDriverUID); // moved from line 103
...
Apparently, there is some change in Sequoia which requires that the session has to be running prior to configuring the default audio device.
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I filed FB15620713