Ouch.

I would modify the CLR Udf to returns a data set of '@amount' Codes and store those to a temp table.

Then delete duplicates with the codes table and re-execute the UDF returning the rowcount from the delete.

Repeat until there are no duplicate rows.

This will minimize the amount of round trips to the udf , plus the SQL logic is much more set based.

Ive never used the RNGCryptoServiceProvider class but you may only have to have one instance of if it if GetBytes returns a different value at each call.

As another thought though does all this function do return a string of variable(edit: random) characters from '34679CDFGHJKLNPRTVXY' ?

If so a pure TSQL solution should be pretty simple

Post back if this isn't clear