I have just now set use Touch ID to unlock your Mac and my M2 air still asked for a password on 2 reboots.
Initially the Touch ID worked after migrating over my M1 Mac mini data but then I made another user account and used a different Apple ID for that one as well as set auto login for my first account. After setting the Touch ID I was prompted that auto login would be turned off. All good, trying to get the prompt for using Touch ID and it says I need to enter my password. I did get a prompt to enter my Apple ID touch when I made this discussion for the community and my Touch ID did work.