VMware Cloud Foundation 5.x
The /home/vcf directory (and files therein) were not readable by the vcf_lcm user, specifically /home/vcf/.ssh/known_hosts. It appears this caused LCM to silently treat reading the file as empty, and so LCM was not able to validate the ssh-rsa key received from the vxrail manager. We did confirm that the proper key was indeed in that file.
We were able to proceed past this first issue by making the entire /home/vcf directory readable by all users in the group : chmod -R 750 /home/vcf .
This change allowed the upgrade to proceed beyond the original failure.