I can only ever get this to work by signing into appleid.apple.com on the web browser. Should be a spot right on the first menu for App Specific Password
@TheCheddarCheese It tells you what you have to do.
As someone who has suffered a very similar situation, I can say that I appreciate Apple’s approach to protecting my account.
Pretty sure it is a bug. Use a different browser and it should work fine, I used edge. I got apple support on the phone and this was this solution. Was not interested is making a bug report, just suggested I leave feedback which is just like pissing into the wind.
So rather than disregard the entire thread and move on, everyone just opts to complain about Apple, on an Apple community, rather than offer any advice.