Windows 11 update compatibility?

Whatever you choose to do, create a backup (image) of your current system first

Macrium Reflect (freeware from MajorGeeks, other links to direct Macrium dowenloads elsewhere in this forum. The free version is no longer available from the Macrium website)
and/or
AOMEI Backupper (freeware)

Create image(s), create a boot USB drive from either/both programs respectively (and even a spare copy as insurance)

Then run the update directly from the MS site. Don't use any links clickable in that message window shown in your OP, just in case it's not genuine MS

EDIT : And if you've a mind to, and you don't already do it, make an extra backup of your personal data in native format (i.e. ,doc as .doc, .jpg as .jpg, etc) using something like SyncbackFree

EDIT 2 : Rollback withing 30 days is still avaiable, AFAIK. However, for me, that would leave a pretty messy system ... upgrade <> downgrade. Alternate absolute ideal way would be ...
- swap out your existing drive for a blank SSD. That would leave your current system, warts and all, intact in case anything goes pear shaped (as they used to say in The Bill) with the new system, and/or it's not to your pleasure
- clean install of Win 11. Test/play with to your hearts content.

It seems to be a new bug as other users are reporting the same on various sites. However as others have said if you try updating it will fail.