Hello Ryan,
In fact IoT is enabled to support the Enablement Package 21H1, as per the next article: https://techcommunity.microsoft.com/t5/windows-it-pro-blog/it-tools-to-support-windows-10-version-21h1/ba-p/2365103
"Simply put, an enablement package is a great option for installing a scoped feature update like Windows 10, version 21H1 as it enables devices to update with a single restart, reducing downtime. This works because Windows 10, version 21H1 shares a common core operating system with an identical set of system files with versions 2004 and 20H2. "
A more descriptive information about the error, or maybe from the Windowsupdate.log in the machine after the update attempt would be helpful for the community to help you further
As always if you have any questions please don't hesitate to contact us.