I decided to bite the bullet and disassembled my iMac (2017)
Put back original 32GB SSD and 1TB HDD. Create Fusion and install Monterey.
After that I disassembled it again and put back 512GB SSD (That was pulled from broken MacBook 2016). Installed Monterey again and it was OK.
System Firmware Version: 447.40.12.0.0
Since I was do it fresh anyway, I decided install Monterey first beta 12.1, that was released yesterday. Got the same error, about not able to installed firmware.
As a result, it was not an apple mistake or fluke, right now Monterey officially has mechanism to verify original hardware and will prevent to install on any outside the apple update.
The funny part was that SSD that I swap was also from Apple. I am not using Syntech adapter for regular NVMe drive, or Aura SSD, or any other aftermarket drive. SSD was swapped directly from apple machine.
So if any further update of Monterey is needed in the future, it will require to put back original SSD again, that become headache. I guess Big Sur will be the last OS that allow outside of apple repair.
Attached images: on the left Original 32GB SSD, on right MacBook 512GB SSD.