Hi. Firstly, thank you for the reply. It's great to know that this new Big Sur upgrade issue is not unique to me! :)
After much searching and trying different things, I finally gave up on finding a quick solution (no doubt there will be one).
I also reviewed a few of the 3rd Party Backup solutions, thinking of just ditching Time Machine.
But in the end I took the more brute force approach of a clean install of Big Sur.
To achieve this (without my Time Machine backup to recover from), I grabbed a spare 2TB USB drive that I had, and also a 16GB SD Card.
I then created a Big Sur installer disk on the SD Card, and clean formatted the USB Drive.
I then booted from the SD Card and created a clean Big Sur installation on the external USB Drive, which included Migrating all my data across from the internal Machintosh HD - Data drive.
Once complete this gave me the confidence of a full back-up, on an external drive, that I could boot-up from (if all else failed).
However, when the migration was successfully complete, instead of signing in to my replicated external boot drive, I instead shutdown and again booted into the SD Card Big Sur installation disk.
I then proceeded to completely erase my internal 1.12TB Fusion Drive (note this also required me to then recombine the resulting seperated / formatted 1TB disk0 drive and 121GB disk1 SSD drive, to re-establist the combined 1.12TB empty Fusion drive - an easy terminal diskutil command).
Finally, as I first did above with the External drive, I now created a clean Big Sur installation on the cleanly formatted internal 1.12TB Fusion Drive, specifying to migrate my data back from my attached USB Drive.
Once this was all completed, I shutdown and removed the SD Card & USB Drive, then rebooted and signed back into my newly installed and recovered internal Fusion Drive, re-signed back into iCloud, and after a short while of disk activity I have everything back and a seemingly snapier machine! :) (Note: This would be my first "clean OS install" since continuously upgrading the OS since I bought the iMac new in late 2014).
Of course, the final step was then re-activating Time Machine, to again start backing-up to my also cleanly erased Time Capsule. This all now worked flawlessly. So, original problem solved! :)
Note that with a nearly full 1.12TB Fusion Drive this process took about 8 hours to create the replicated USB3 connected bootable system Drive, but only around 4 hours to then re-create and replicate everything back to the Internal Fusion Drive.
In summary, although I have no idea what the cause was (or a more direct fix is), for the original "Time Machine could not back up the disk "%@" issue, I'm actually very happy with the way I resolved this. Because I now have the satisfaction of a cleanly installed Big Sur OS, with all of my accounts and data restored and a snapier "cleaner feeling" system.
But of course, you need to make your own choices on how to resolve your own issue, as (of course) YMMV.
Hope this is helpful.