I have tried what you posted and yet the notifications are still not working for the Instagram application.
Here are the specs of my phone
Hardware - 11 Pro Max
Capacity - 256Gb
In use - 116.06 Gb
iOS - 14.4.2
IG ver - v181.1.0.27.117 (released app 2021-04-01)
The application does show up in the notifications list in the phone settings and all the buttons are enabled (green)
I too have reset the data portion on my phone several times and re-installed the Instagram application with each data reset.
Each re-install of the app looks like the installer app is being pulled down from my cloud and not from the App Store.
The strange thing is when the app is active on the phone screen the notification seems to work, when a message comes in it displays the notification button. However when the app is running in the background it does not notify you. Attached are the current screen shots of the notification settings yet when the app is not actively running it does not fully work.