Unresponsive Magic Trackpad over Bluetooth on MacBook in macOS Tahoe 26.1

Magic Trackpad (2 Lightning, firmware ver. 8.7.1) is not usable over Bluetooth on MacBook Pro M3 Pro (14" Nov 23) in Tahoe 26.1, only connects. It is usable when plugged in via lightning to USB-C cable and is detected when connected over Bluetooth, just does not respond to touch or click.

When disconnecting the cable or turning the trackpad on with no cable connected it says "Magic Trackpad Connected" in a notification and occasionally prompts the "Keyboard Setup Assistant" and asks me to press the key next to the left Shift key (which if you can tell me how to do that on a Magic Trackpad you get bonus points).

I have tried resets/restarts and have removed the device and re-added it both via connecting the cable and over Bluetooth. When connecting via Bluetooth it is detected and connected but is unresponsive to touch even though it shows back as connected in the Bluetooth menu. All functioning comes back if plugged in via cable.

This started sometime after the update to MacOS 26/Tahoe, can't say for sure if it was right after upgrading to 26.1. Could be hardware related but the behavior seems odd if so.

[Re-Titled by Moderator]

Original Title: Magic Trackpad