what’s the difference between adding a yubikey as a normal device to the internet identity anchor and adding it as a recovery device?
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The difference is whether you can use the device in the normal login flow (by clicking “Authenticate” – and thus also in authenticating toward other canisters) or in the recovery flow (by clicking “Lost access and want to recover”).
The thinking behind the distinction is that it’s better to have a specific device for recovery purposes which one does not use in everyday operations. (My personal way of using this is installing the “FIDO U2F” App on a Ledger Nano and using that as a recovery key.)
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Makes sense, no point having two fido keys then keeping both on the same keyring.