macOS Monterey install can not select startup disk

I've had better luck from the Safe Mode because I evidently have some 3rd party software that interferes with the installation so try the following:

#1 - boot into Safe Mode according to Start up your Mac in safe mode - Apple Support.

NOTE: Safe Mode boot can take up to 3-5 minutes as it's doing the following; 

• Verifies your startup disk and attempts to repair directory issues, if needed

• Loads only required kernel extensions (prevents 3rd party kernel/extensions from loading)

• Prevents Startup Items and Login Items from opening automatically

• Disables user-installed fonts 

• Deletes font caches, kernel cache, and other system cache files

#2 - go to the System/Software Update preference pane and begin the download.

#3 - run the installer from the Safe Mode.

Same for me. In 12.1 still not fixed. Usually I download a new OS version as normal user and the installer asks for admin privileges after starting the update process. But this does not happen for 12.x on M1 Macs resulting in the misleading error message, that Macintosh HD must be specified as startup disk. At the moment one must boot the Mac as admin or give admin privileges to the normal user to install 12.x

Greetings hams__, 

We understand you’re encountering an error message when installing a software upgrade. 

Is your user an admin user on your Mac? If not, are you able to either change the privileges to an admin user or run the update from an admin user? You can view the user privileges in System Preferences > Users & Groups. 

We do see that you went through and re-selected your startup disk. Did you have a chance to restart after making that selection, even if it was already set? 

Thank you.