Update (September 22, 2021): Microsoft released Windows 11 Insider Preview Build 22463 to the Dev Channel and there was a fix: “Fixed an issue that caused some PCs to bug check with DRIVER_PNP_WATCHDOG error when attempting to update to a recent build.” That fix solved this problem, also.
Update (September 20, 2021): I updated to build 22458 with an NTFS formatted external USB 3.0 hard disk attached. But after the successful update, I plugged a M.2 SSD into the same USB 3.0 bus that had a working 4TB USB 3.0 hard disk and got the same errors as I describe below. I switched back to the Beta channel and updated successfully to 22000.194 with the all external drives connected.
TL;DR Windows Insider Build 22458 and the previous two builds (22454 & 22449) won’t install with a connected external USB 3.0 drive that has an APFS partition and NTFS partition.
On September 15, 2021, Microsoft released Windows 11 Insider Preview Build 22458 to the Dev Channel. I had switched back to the Beta Channel (22000.184) because my attempts to install the two previous developer releases (22449 and 22454) failed.
I switched back to the Developer Channel to try the new build and 22458 started installing but after the reboot, I was back at 22000.184. The two external USB 3.0 drives that I had connected during installation caused the problem. Disconnecting the drives then letting Windows Update install 22458 worked. But connecting the external USB 3.0 drives caused the same problems as the two previous builds.
I had Disk Manager open as I connected the two drives and they would show up without drive letters, then the Bluetooth keyboard and mouse would disconnect. The drives would disappear and reappear from Disk Manager and the Bluetooth would reconnect. After disconnecting the external drives 22458 worked as expected. I rolled back to 22000.184
Since I have a 5TB internal disk drive on the system SATA controller, I finally realized that I should try an external USB 3.0 drive formatted only NTFS. This drive worked with 22458 with no problems, so I am concluding that 22458 and the previous two Developer builds don’t like drives with non NTFS partitions (though I have not tried any Linux file systems).