I have had this too and tried various things that didn’t work but this did:
1) go to wallpaper and un-blur the image and press done …. now make sure to close the settings window by swiping it totally off. Your home screen image should be unblurred.
2) go back into settings, back to the customise wallpaper page and re-blur the image. click done and again totally close the settings app. home screen should now be blurred.
Seems to work on my iPhone15Max … key things appears to be to totally close the Settings between changes and not have it running in the background.
Interested to know if it works for you ?