DiskunI have EXACTLY the same issue...
I have the exact same issue on the very similar ASUS TUF A15 2021 FA506QR (R7 5800H + RTX 3070 + 16gb 3200mhz).
Until a few days ago everything was fine. Now FN + Arrow Left/Right (<Aura / Aura>) changes lighting mode but FN+Arrow Up/Down won't change keyboard backlight level. Also I'm not getting an on-screen prompt for FN+Up/Down anymore.
Keyboard backlight can be set on Armoury Crate app, but not by using the keyboard shortcut. Not even on the BIOS screen, which means something must be broken at a firmware level.
This used to work until a couple days ago. I don't recall getting any updates recently that could have triggered this. I have tried everything, even formatting the system and reinstalling Windows from scratch which I just finished doing. It proved to be a waste of time.
This is really inconvenient and makes me wonder why a feature such as keyboard backlight depends on unreliable software from ASUS. My old laptop didn't require any software for basic keyboard lighting control.
May you try the latest ASUS System Control Interface v3 V184.108.40.206?
If it still does not work, please kindly send the device to our service center.
Really sorry for the inconvenience caused.