I have tried a yubikey on ubuntu without any problems. Could you please describe what exactly isn’t working

You might need to switch to a smaller instance.

If you want a kali-based live environment, you can follow this tutorial: https://www.kali.org/docs/development/live-build-a-custom-kali-iso/ You can configure a lot of options and most of the building process is just downloading packages.

Many ARM boards (including raspberry pis) are designed to run with linux. So the manufacturers can customize the kernel and firmware for the boards.

In theory, you could make a XMPP bot that can do all these things. Status information and executing simple commands shouldn’t be that hard but interactive commands might need a custom wrapper.