I have the same issue.
Today is 2021-08-12.
I'm already on the latest of Windows 10 21H1, with all up-to-date fixes, and all firmware and drivers' updates provided for Surface Pro 7, through Windows Update.
Resetting the machine would work around the problem, but it would come back every few days.
I would notice a red light ON for the camera when the problem occurs.
Also, I tried to download the Intel AVStream Camera driver from Intel website. But Intel website have no driver for this camera. They said we must go back to the OEM (which is Microsoft in this case).
So I'm stuck with this problem.