Just to add to the case to possibly help the devs work on a solution.
External display connected to my M1 Max MacBook Pro using the HDMI port, HDMI to HDMI, was working fine.
Until, I clicked the annoying screen button on the top right ( the one that make me feel like someone is watching my screen even though its just my own computer sharing display to my own display in front of me ), and I tapped on "Stop Extending"
This was it, there was now no way of making the screen extend to the monitor, the Mac refused to see it anymore, restarts, unplug and plug back in, different HDMI cables, nothing. Have had to resort to a usb c dongle for now, but I hope a fix comes about because this is weird.