Well, cannot comment on Ventura as I usually wait for at least the first or second „point update“ of a major macOS release before upgrading.
But I updated to 12.6.1 (and Safari 16.1) without issues or reversing to the „corrupted boot process to an external user account“ by using the administrative user account on the internal ssd to launch the update procedure.
It took 5 (!) automated reboots during the update process but it finished without issues.
So it might be an idea to upgrade to Ventura from an administrative user account which resides on the boot volume instead of launching the upgrade from the user account sitting on the external Volume.
It still remains unclear, what caused this login issue, but most affected users should be able to fix it with these steps:
[Note: as I’m not on an US-american OS, some parts may not be correctly named. I added an asterisk to indicate these parts but it should be clear regarding contents].
1)
Use „Go to“ Menu for „*Go to Folder…“, type „/Volumes“ and hit „Enter“
2)
In the upcoming Finder window one will see an Alias pointing to the Macintosh HD and at least 2 more Volumes.
One will show a macOS „Volume icon“ (Volume Volume / VV), one will show up with a default macOS Folder icon (Folder Volume / FV).
The VV will have the name of the external Volume with an added number (i.e. VolumeXYZ_1).
The FV will show up with the expected external Volume name.
The VV will hold all the data of the external user account, while the FV will only hold some empty folders but also with an invisible User Library folder (/Volumes/FV name/Library).
3)
Rename the FV, i.e. by adding an „#“ at the end.
Then rename the VV to the original name by removing the numbering.
4)
Open System Preferences > *Users and Groups.
Unlock and right-click/contextual click on the external user account in the users list on the left side to open *extended options…
5)
Under *User Folder, set the user folder location to your actual path (manually or by using the *Choose… Button.
6)
Close everything and reboot.
Your now should be able to boot directly into the user account which resides on the external Volume.
As Tom Ritch pointed out, it might be a good idea to hold the FV for a while just in case you find out later, that some applications did write preferences or settings into the User Library on that Volume.
In this case it might be possible to grab the files in question to have them replace the ones in the User Library on the VV.
Otherwise one might feel compelled to set up individual applications preferences again here and there.
(At the end the FV can be deleted sometimes).
And of course do not forget to backup before updating/upgrading an OS.
cheers