Your system is fully Windows 11 compatible, try this fix for that installing on a USB error when updating your system.
Click your Start Button, type regedit and hit Enter to open the Registry Editor
Click View and make sure 'Address Bar' is turned on
Paste this into the Address Bar at the top and hit Enter
HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\Control
Then in the right pane if this value exists - PortableOperatingSystem
Right click and delete it
Close the Registry Editor and restart your PC
Then check if the update will complete.