We discovered that the mno-scale-out.yml playbook uses a feature oc adm node-image create that is only available from OpenShift 4.17 and newer.
If we want to work with a 4.16 version, we need to use the Assisted Installer alternative, using discovery.iso, as documented
The process is similar, but ultimately different enough.
Maybe we could suffice with a version check as part of mno-scale-out, if we assume folks won't be using 4.16.