I am having this same issue. I have been meticulous in setting up people in my photos app. When I updated to iOS 17, most of the people were listed as options for the lock screen photo shuffle. I then spent some time in Photos, connecting the people with contacts. Now, I don't even have the option to select people on my lock screen.
I did just have an insight though- How many people having this issue are using the Shared Library feature? When I view "People & Pets" in Photos on my Mac, everyone is there if I have "Both Libraries" selected, but not "Personal Library" or "Shared Library". Photos even gives a note to say that "Both Libraries" must be selected.
I'm guessing the Photo Shuffle feature is not aware of Shared Libraries and that, originally, some of my people were still linked to my personal library. When I updated and connected People with contacts, they became part of "Both Libraries" and no longer visible to Photo Shuffle.