Unable to update app until users are removed: 'groups have failed validation'
I have raised this as a support ticket. The outcome after speaking to support is basically "tough luck, that's how it works".
An idea has been opened to broadly change how access is removed from larger numbers of users, but it is rather general.
So although the Power BI access system is built around individuals requesting access and being granted on a per-person basis, the best solution is to reject all individual requests and only use groups set up using another part of Office 365. 😞
If anyone else is having this issue, the only solution I can recommend is using groups and otherwise putting up with the inconvenience.
If anyone in product development reads this, the (possibly) lowest effort change that could be made would be to make the "can't update app until these groups are removed" error message contain the full human names as well as the names of underlying accounts, or otherwise flag the invalid accounts to make them easier to spot.