OK, I have updated to 12.2.1 on my desktop as well as my two laptops. I see no real difference in the behavior, other than that iTunes is oblivious to my iPod when I plug it in to allow it to sync. This is probably because I did an update rather than a clean install, so I didn't remove the Apple Mobile Device Support and hence the user-mode iPod driver from the Windows driver framework, so it didn't have to reload it from scratch, that seems to have some kind of effect.
Before starting iTunes and before connecting my iPod, I tested to see whether the iPod Service was restartable from the Services console, and it was, as seen by the PID changing in the Task Manager display. I started iTunes, and tested restarting the iPod Service and it was still restartable.
I plugged in my iPod and I can see by watching the iPod Service in the Task Manager that it claims to be doing I/O Other, and if I stop iTunes activity (no music playing), iTunes seems to be doing I/O Other as well, somewhat in step with the iPod Service, but there is no evidence of activity on the iPod, nor is there any evidence that iTunes is aware that the iPod is present and should be sync-ed. For instance, all the "Device" options are greyed out under the "File" pull down menu.
I can see the iPod both as a Disk and as a Portable device in the device manager, and the disk shows up in "My Computer" but when I try to eject it, I get a warning that files are open on the device and it would be a bad idea to disconnect it. So perhaps the iPod Service is accessing the iPod, but other than that I don't see anything much happening.
Still badly broken. Let's hope Apple has noticed this conversation and is actively working on a fix.