The new Erase all Contents and Settings feature in macOS 12 is awesome, but at the moment, it renders the OS unusable after activation. Once the erase and restore has taken place, it is expected that the Setup Assistant is visible; however instead, the user is placed at the login window with username and password text fields. At this point, no user is created on the system as the Setup Assistant should be present.
It's worth knowing that when the issue occurs, one can boot into recovery to see the state of the disks in Disk Utility. On a failed erase, an error is presented when attempting to mount the Data drive: Could not mount "Macintosh HD - Data", (com.apple.DiskManagement.disenter error 49229.)
A successful erase and restore, typically by other means such as "Erase Mac..." via recovery results in a correct volume layout.
I've filed an FR for this, under FB9148433.
Thanks!