How to specify entity reference fields when programmatically submitting to user_register_form
I think form might be expecting in proper format that is "[entity-title] [entity_id]", so field array should look like.

'field_foo' = {
    'und' = [
        0 = {
            'target_id' = 'Title of entity ($tid)'
        }
    ]
}


Just to make sure you can form alter user form, add a custom validate and do a dsm($form_state);