We worked a ticket with Microsoft on this issue and here is their response:

I was able to get a meeting with some of the backend engineers from the private link side so we can get some clarification over why the api.loganalytics.io is not properly resolving with the alias monitor.azure.com. They let me know that this is now a known issue on their end and are working to remove the api.loganalytics.io completely form the service and in the future will only be using the monitor.azure.com, however they were unable to provide an eta over this other than "soon". In the interim what they suggested was to add another forwarder for loganlytics.io pointing back to Azure DNS.

I was able to get confirmation that api.loganlytics.io is the only A record impacted by this known issue.

Lastly this is an issue that only applies when using forwarders, If name resolution goes directly to Azure DNS, it resolves properly. Which is why you still see it showing as the alias with a nslookup.

We went ahead with the additional conditional forwarder on api.loganalytics.io to work around the issue.