As you've discovered, upgrading to iOS 16.x REMOVES existing wallpaper images without any warning, offering instead to blur the current Lock Screen image. Just because they can, I suppose. The Apple-suggested workaround is a poor substitute for NOT MESSING WITH YOUR SETTINGS IN THE FIRST PLACE!
If by chance, your prior wallpaper image was an image you previously saved to Photos, you're OK, just retrieve it from Photos.
If it was a wallpaper image that Apple provided free with an earlier version of iOS, you can probably still find it online, just not from any Apple resource.
My wife's iPhone SE 2020 still used an older iOS wallpaper image with a blue-green wave washing up on a sandy beach. So after upgrading to iOS 16.x and losing it without any warning, I searched for "iOS wallpapers" online, found it, downloaded it, added it to Photos on the phone, saving it to a new 'Wallpapers' folder I created. Now I can find it easily, because I'll need to restore the wallpaper EVERY TIME I change the Lock Screen image on the device.
Of course, that still won't restore the beautiful thin time, day, and date font used by iOS 15 and older, nor will it once again place the day and date back below the hour and minute, as it had been through many generations of iOS.
File this under "Making your smart devices ever more frustrating, through arbitrary, and completely unnecessary iOS changes you never requested."
Another example: Arbitrarily replacing the beautiful jewel-like skeuomorphic app icons of early iOS releases with Jony Ives "black, white, and flat" design language in iOS 7 and more recently, what I call "bright, gaudy & gradients".
And yes, I have reported my iOS frustrations through the 'official' Apple suggestions channel.
