Ok I managed to make it work, this is definitely a bug somewhere.
Apple support didn't get back to me as they promised, very disappointing.
So it seems like there are 3 settings that have to be "On" in order for Home sharing to work.
- Apple ID (sign in for the Mac)
- Music App authorization (more on this here: Home sharing on Catalina not working - Apple Community)
- The sharing setting in "system Settings"
The 3 settings has to be turn on in the order above. Also, I experience time lags between steps for it to work, so if you do the 3 steps in quick succession , it will not work.
Here is what seems to work for me.
- Make sure your setting 2 and 3 are turned off
- Sign you apple ID out, and then reboot.
- After reboot, turn back the 3 settings to on in the order listed, step away from your computer and get a coffee between each step.
This worked for me, hopefully for you as well.
Good luck!