Here is a solution that seems to work 100% so far:

In T175463#2509069, @Iwouldalsolikeyoutosendhelpplez wrote:

i dont see why someone at xbox isnt running a diagnostic on the current state of console mouse drivers. its so obvious thats the issue i told them this like a month ago and they didnt listen. xbox support keeps getting worse and worse cant even phone them anymore about hardware issues its a joke.

I guess it's an issue that is being experienced by other games on Xbox that have native m&k support. Games like State of Decay 2, Cyberpunk, Sea of Thieves, Flight Simulator, and others. It could be a system-wide issue. I posted on the Series X subreddit and the post was met with resistance with users there insisting it is a DayZ issue only. The post was eventually stricken. Mods state it was a support post. I tried framing it as a growing issue of concern throughout the Xbox ecosystem but it wasn't enough to satisfy the support post rule on the subreddit.

I've been having this same exact problem this week. I'd hate to leave the Xbox insider program as it gives me access to many features before the general public and I have been bug free for the most part. But this bug is pretty devastating for anyone using mouse and keyboard on Xbox.