I have enabled the “instant on” feature for testing purposes and things seem to be working fine with Airfoil. I have Spotify streaming through an Apple TV via Airfoil and Airplay. Although, I must note I can do this without Airfoil. I’m curious what the use case is that makes Airfoil useful?
Just make sure DPS is not running when you first install the “instant on” extension (or add-on.) I’m not very familiar with Airfoil, I remember testing with it some years ago. Possibly the advice to avoid “instant on” is vestigial from a previous version of Airfoil.
Try it out, let us know what you discover!