We are trying to set a rule on a our authentication layer within our policy, for an individual AD account, but we don't appear to have the option to select the account under the Source option.
AD user/group isn't used in the source object, in the authentication layer, by design. For the available objects, please refer to the list in the snippet below., as reflected in the Web VPM.
It's also worth mention that for regular web authentication, generally, you really wouldn't need to have the AD user/group referenced in the source object of the authentication rule, since this reference is already made in the source object in the linked web access rule.