That odd behaviour and "can't even do a safe restart" state sounds very familiar to those who have used Win9x; and there, it's usually the result of some memory corruption in the kernel.

The bug first appeared with the monthly updates 2023-03 (KB5023706) for Windows 11 and 2023-04 (KB5025221) for Windows 10. The initial releases of Windows 10 and Windows 11 22H2 with no updates do not have this bug

...and everything older likely doesn't either, especially from the time when VCDs were far more commonly used.

Pulling the files off (and ignoring errors, the way Windows does) loses that.

I suspect this might be the clue; perhaps some overzealous "security scan" tool (or these days, AI) flagged a "bug" in the error handling path, and something was done to appease it, but created this other subtle bug.