@cdf I believe something has changed in 12.7.1 - Clean installation or reinstallation with hybridization enabled is not possible as the firmware update prompt keeps popping up with no way to bypass except with VMM flag enabled.
I only noticed this after successfully updating from 12.7 to 12.7.1 with hybridization enabled but after shutting down the mac, I was not able to boot into macOS as I kept getting a kernel panic after entering the password (something about a Global pointer being null or something).
Can you confirm this?
Forgot to add - I never had any issue installing, reinstalling or updating with hybridization enabled with releases up to 12.7