Same issue here - MBA M1 + iPhone 11 Pro Max.
I am downloading this way many pictures daily, so this is affecting my productivity a lot.
The 21st century, Western Europe, thousands of £ spent and at the end of the day Apple cannot get the most basic feature work properly. Seriously ???
Using Airdrop instead is like using the passenger door if the drivers door won't open - just wow, typical Apple fanboy advice, actually I expected something like that.
The Image Capture is there, so it should work whenever I fancy using it, as I already have paid for it - end of story.