12.5.1 broke filevault

Im updating to 12.5.1 now so I'll keep an eye out for it but if the update did break FileVault apples timetable to fix this is up to apple. you can report this to Apple using the feedback website

Product Feedback - Apple

Try enabling Filevault again. Once in a while over the years I have seen people post login issues which were resolved by turning off Filevault, then turning Filevault back on. When Filevault is enabled (at least on older 2017 & earlier Macs), the login password allows both unlocking Filevault & logging into a macOS user account. Technically behind the scenes there are two passwords...one for the user account and one for Filevault, but macOS just combines them behind the scenes so the user only has to enter one password when logging in. Sometimes this behind the scenes link can become broken. Or maybe there is a file system issue that could not be dealt with otherwise. You may want to run Disk Utility First Aid on the hidden Container. Even if First Aid says everything is "Ok" click "Show Details" and scroll back through the report to see if any unfixed errors are detected. If there are any unfixed errors, then run First Aid from Internet Recovery Mode, otherwise you will need to erase the drive before reinstalling macOS & restoring from a backup.

FYI, I have also seen numerous posts on here about people reporting other user account issues with the Monterey update. Probably certain configurations may trigger some of these issues.

Just make sure to have a good backup first just to be safe in case something goes wrong before turning Filevault back on.

You should always have frequent and regular backups of your computer and all external media (including the cloud) which contains important & unique data.