The issue at hand seems to have been dual scanning.
Our policies were imported from a Server 2019 environment not knowing many polices were either changed or deprecated.
The solution to this given to me here by AJ was the following:
- Removal of all deprecated Windows Update for Business policies. These were for us sitting under Computer Configuration/Policies/Administrative Templates/Windows Components/Windows Update/Legacy Policies and Manage updates offered from windows update. After setting them to "Not Configured", the associated registry keys were reset to their default values following AJs guide: https://www.ajtek.ca/wsus/dual-scan-making-sense-of-why-so-many-admins-have-issues/
- Since windows server 2022, microsoft had introduced a new policy to specify the update source. Configuring the policy Specify source service for specific classes of Windows Updates under Computer Configuration/Policies/Administrative Templates/Windows Components/Windows Update/Manage updates offered from Windows Server Update Service to for all update types to be pointed at WSUS. This was also set following the guide: https://www.ajtek.ca/wsus/how-to-setup-manage-and-maintain-wsus-part-4-creating-your-gpos-for-an-inheritance-setup/
- After this all clients were removed from the WSUS console and reset to report in again.
Much appreciated for the help. Hope this finds anyone having problems.