I am having difficulty importing my music library into Apple Music

See Move your iTunes/Music library to a new computer - Apple Community. Since Big Sur runs Music you shouldn't be converting a .itl file again at this stage. You don't import the .musiclibrary file, you choose it having opened Music with Option held down.

tt2

Hours with the spinning wheel suggests something is not right. It should take a few minutes at most to update a library from one version of Music to a later one. Converting .itl to .musiclibrary on Monterey consistently hangs, but you're not doing that, so I don't know what the issue is. Do you have any third party security software? See Repair security permissions for iTunes/Music for Mac - Apple Community in case there is an issue there.

tt2

Any item already connected to the library is assumed to be at recorded path for it. This is independent of the media folder location, although in some cases the library can make an adjustment if things are moved. The Keep organized option should only change where a file is stored after a change is made to its metadata, or on import from a location inside the media folder. The Copy files option only has an effect if a file is added from a location outside of the media folder. Changing the media folder location tells Music where you would like future imports to be stored. It is also the target folder if you consolidate the library.

In a standard Music library the .musiclibrary package is inside ~/Music/Music and the media folder is set to ~/Music/Music/Media. If the library has been updated from an older iTunes library the bulk of the media may well be on a different path. You would normally want this folder to be the media folder location. See Managing your Mac media libraries - Apple Community for further background.

tt2

You're welcome. 🙂

tt2