You are correct, there are some widely reported bugs in the KB5120998 optional preview update that was released at the end of August, including black desktop backgrounds and mouse cursor problems.
KB5120998 is an optional preview update, it is basically an early beta release of the September update.
The optional preview updates can be hard to install sometimes and there is no need to install the optional preview updates.
If that update is continually failing, below that update is a switch to 'Get the latest updates as soon as they are released', disable that option and restart your PC, that will stop the optional preview update continually trying to install and wait for the full September update to be released, Microsoft should have the bugs in that update fixed before the full update is released