[step:Rewrite the projected identity as the extrinsic distributional equation]
For $p\in N$ and tangent vectors $X,Y\in T_pN$, the nearest-point projection identity and the convention $A_p(X,Y)=(D_XY)^\perp$ give
\begin{align*}
D^2\Pi_p(X,Y)=A_p(X,Y).
\end{align*}
Indeed, choose a smooth tangent vector field $Y_0$ near $p$ with $Y_0(p)=Y$ and differentiate the identity $D\Pi(Y_0)=Y_0$ in the tangent direction $X$. The tangential part is $D\Pi_p(D_XY_0)$ and the normal part is $D_XY_0-D\Pi_p(D_XY_0)=A_p(X,Y)$.
Since $du$ is tangent to $N$ almost everywhere, the preceding identity gives
\begin{align*}
D^2\Pi_u(du,du)_g=A(u)(du,du)_g.
\end{align*}
It remains to compute the sign in the mixed term. For $p\in N$, $X\in T_pN$, and $Z\in\mathbb{R}^q$, choose a smooth tangent vector field $X_0$ near $p$ with $X_0(p)=X$ and differentiate the scalar identity $X_0\cdot D\Pi Z=X_0\cdot Z$ in the tangent direction $X$. Since $D\Pi_p$ is self-adjoint and $D\Pi_pX=X$, this gives
\begin{align*}
X\cdot D^2\Pi_p(X,Z)=(D_XX_0-D\Pi_p(D_XX_0))\cdot Z=A_p(X,X)\cdot Z.
\end{align*}
Applying this pointwise with $p=u(x)$, $X=du(x)$, and $Z=\psi(x)$, then contracting with the metric $g$, yields
\begin{align*}
\bigl(du,D^2\Pi_u(du,\psi)\bigr)_g
=
A(u)(du,du)_g\cdot\psi
\end{align*}
for every $\psi\in C_c^\infty(U;\mathbb{R}^q)$. Substituting this into the weak projected identity gives
\begin{align*}
\int_U (du,d\psi)_g\,d\operatorname{vol}_g
+
\int_U A(u)(du,du)_g\cdot\psi\,d\operatorname{vol}_g
=0.
\end{align*}
By the definition of the distributional Laplace-Beltrami operator,
\begin{align*}
\Delta_g u(\psi):=-\int_U (du,d\psi)_g\,d\operatorname{vol}_g,
\end{align*}
so the last identity is exactly
\begin{align*}
\Delta_g u-A(u)(du,du)_g=0
\end{align*}
in $\mathcal{D}'(U;\mathbb{R}^q)$.
[/step]