I just setup my HomePod as a stereo pair. Initially I wanted to use iCloud music so that I would have access to my iTunes playlists on the HomePod. However there were so many tracks that were marked by iCloud music as "ineligible" or "error" that I decided that I would just airplay from iTunes on my iMac. This would also solve the problem of the low quality bitrate used by iCloud music.
However trying to streaming a music track from the iTunes library on my iMac I got the error message:
So I spent 2 hours with Apple support trying to fix the problem. It turns out that it depends on what shows in the Airplay menu. If it showed:
I would get the error message and no song from my iMac iTunes library (other than the one track which inexplicably worked) would play. Any track I selected other than the one which worked would give the error message. If, however, I selected computer on the list I would now get the "full" list of devices:
Now if I select either of the HomePod living room choices the tracks that previously gave the error message play.
I suspect that this is a bug. Apple support is working on it.
However trying to streaming a music track from the iTunes library on my iMac I got the error message:

So I spent 2 hours with Apple support trying to fix the problem. It turns out that it depends on what shows in the Airplay menu. If it showed:

I would get the error message and no song from my iMac iTunes library (other than the one track which inexplicably worked) would play. Any track I selected other than the one which worked would give the error message. If, however, I selected computer on the list I would now get the "full" list of devices:

Now if I select either of the HomePod living room choices the tracks that previously gave the error message play.
I suspect that this is a bug. Apple support is working on it.