KB5077181 was released about a month ago as part of the February Patch Tuesday rollout. When the update first arrived, users reported a wide range of problems, including boot loops, login errors, and installation issues.
Microsoft has now acknowledged another problem linked to the same update. Some affected users see the message “C:\ is not accessible – Access denied” when trying to open the system drive.
That is certainly true and may very well be the case here.
It could also be the case that a human developer forgot to bounds check an array and iterated out of bounds, corrupting some important kernel variable. We won’t know unless we get a postmortem.