@Filip Zan @Chris Whiting @roger chang @Tim Myers
Apology for the delay and any inconvenience with this issue. The product team has updated the code to fix this issue: https://github.com/Azure/azure-functions-host/pull/7270 and the fix will start deploying soon.
You can watch the app service announcement repo to receive notification about new version releases: https://github.com/Azure/app-service-announcements/issues
The workaround would be to pin it to version 3.0.15406: https://learn.microsoft.com/en-us/azure/azure-functions/functions-app-settings#functions_extension_version