The WordPress developers have noticed a theme bug when upgrading WordPress core from 6.7 versions to the latest 6.8.1 update, encouraging developers to hold off on making the jump to 6.8.1. This bug breaks the authoring experience for the Image Feature component and disallows removing, updating or adding any images to these blocks. Please note that existing blocks won’t be broken for your users, you will only have trouble editing.

For a temporary solution you can add the block using the old builder tool and the WordPress Custom HTML block or possibly reverting to a backup that is from 6.7.

The developers are working to fix this bug as swiftly as possible. Keep an eye out for the next release.