Does AppleCare+ cover keyboard damage?

It appears the right side of the key cap is damaged (as shown in the picture).....it looks like the "hook" area is a bit twisted. I think you need a new key cap. The right side of the key cap should be angled so it makes contact first so you can move it toward the right so it wraps around the nubs on the right side of the scissor mechanism.....then lower the left side so it can snap onto the left side of the scissor.

Apple will likely charge you $299 US for the repair since the Keyboard would be classified under the "Other" category with the AppleCare+ accidental damage section. Check the AC+ documentation to confirm details.

I doubt Apple will just replace the key cap itself, but an Apple Authorized Service Provider may if they realize that Apple does actually provide an entire Key Cap Kit (not cheap, but much less than $299US). Those key caps tend to be the same as the ones for the 2019+ Apple laptops so being able to pull a key cap from a scrapped unit may work. Some AASPs may even have access to spare/used parts for just such occasions to help keep repair costs low. I'm sure some vendors may sell individual Key Caps as well. Keep in mind there are regional differences between Keyboards. So far for the US keyboards I haven't had an issue using a key cap from a 2019+ laptop on an M-series Mac (only had a few occasions to do this though).

Yes

I would contact your nearest Apple service tech and ask for cost verification as the rules and "small print" are not very clear (at least to me) what is covered as it relates to the keys and board.