The update KB5034441 failed with a fatal error when staging the WIM. This is due to a lack of free space in the WinRE partition. KB5034441: Windows Recovery Environment update for Windows 10, version 21H2 and 22H2: January 9, 2024 - Microsoft Support
Resizing the Recovery partition to 750 MB resolves the issue. That applies if you use the Windows-default winre.wim.
For OEM-supplied winre.wim (which has additional drivers and packages), ensure the Recovery partition's size is atleast 100 MB more than the size of the custom wim.
KB5028997: Instructions to manually resize your partition to install the WinRE update - Microsoft Support: https://support.microsoft.com/en-us/topic/kb5028997-instructions-to-manually-resize-your-partition-to-install-the-winre-update-400faa27-9343-461c-ada9-24c8229763bf
Note: The above MS article works only if your Recovery partition is situated next to (i.e., right side) the OS partition. You can check the disk layout by opening Disk Management.
(Based on what I've noticed on the forums, many users have decided to skip/hide the KB5034441 update and wait and see if Microsoft releases a fix.)
After command SFC /scannow
& resize of WinRE to 1GB, managed to get this update working. 👍