How to fix highlight color issues on Mac mini?

You're in the Accessibility settings, those apply if you have various other accessibility options active. The setting for the system highlight color is in System Settings > Appearance:

Experiment with the Display Contrast and the Increase Contrast/Reduce Transparency System settings:

I have my highlight color set to blue and get this:

This is with a Mac Mini M4 with a 32" LG 4K monitor.

Have you tried rebooting the Mac?

Perhaps I'm unclear on what you're trying to achieve. That setting affects the highlight color for selected text across applications (macOS and others). When I set it to red and select a block of text, I see the red highlighting. Do you not?

Here's an example, but I see the same when renaming a folder in Finder or selecting a word in MS PowerPoint.

You're welcome. 👍