I had the exact same issue and symptoms and finally fixed it by following this https://answers.microsoft.com/en-us/windows/forum/all/how-to-run-in-place-upgrade-in-windows-11/4d469147-2747-4dcb-88a4-aae9273a4500?auth=1
I installed with the default "keep all my files and apps" option and after it was finished I had to download a handful of windows updates before it got back to this one, and it finally installed w/out issue. I still think it was related to Malwarebytes, I found some users on their forums with same issue and may have fixed it with their help. It seemed to be a permission issue according to a log file I looked at about the failed update, but I did not want to try and edit any permissions, I never changed any to start with and seems like anytime I do that I end up with permission issues forever.
Anyway the fix in the link above was easy, and fast if you have SSD drive.