Sorry, but not entirely true. After contacting Apple Support and going around and around with them for several hours, rebooting in Safe-Mode to clear caches, running disk integrity checks, and reinstalling Catalina; I was finally told that yeah I have all the updates and needed to upgrade to Big Sur. However, after demanding to talk to a Senior Advisor, within minutes he told me this blind "A Software Update is Required to Connect..." message only referred to some USB driver updates Catalina needed to connect with iOS 14.6. Why in the world even after reloading the entire OS, it doesn't pickup the latest driver is a mystery that only Apple can answer.
So bottom line. Big Sur was not required. Just driver updates so it was safe to click on the "Install" button. It wouldn't send me down the Big Sur rabbit-hole. Better language in this error-message would have circumvented this entire ordeal.