Exactly the same symptoms:
- Could not connect Quest 3 by link
- Link app required the update
- Repair failed
- Clean reinstall (with no monitors or extra usbs / in a safe mode) fails

Though have slightly different OculusSetup.log:

...
[Debug] [09-Dec-25 11:28:30] Setting installed release channel to 'LIVE'.
[Debug] [09-Dec-25 11:28:30] Install 'Dawn.Setup.CreateRegistryKeysStep' succeeded.
[Info] [09-Dec-25 11:28:30] Driver version from supplied version file: 1.77.0.000000
[Error] [09-Dec-25 11:28:34] Process C:\Program Files\Meta Horizon\Support\oculus-drivers\oculus-driver.exe exited with code -2 (failure).
[Debug] [09-Dec-25 11:28:34] Install 'Dawn.Setup.InstallDriversStep' failed.
[Warning] [09-Dec-25 11:28:34] Rolling back installation.
[Error] [09-Dec-25 11:28:38] Process C:\Program Files\Meta Horizon\Support\oculus-drivers\oculus-driver.exe exited with code -1 (failure).
[Debug] [09-Dec-25 11:28:38] Uninstall 'Dawn.Setup.InstallDriversStep' failed.
[Debug] [09-Dec-25 11:28:38] Uninstall 'Dawn.Setup.CreateRegistryKeysStep' succeeded.
[Debug] [09-Dec-25 11:28:38] Uninstall 'Dawn.Setup.InstallShortcutsStep' succeeded.
...

And there is my OculusDriverInstaller.log

...
[Debug] [09-Dec-25 11:28:36] -------------------------------
[Debug] [09-Dec-25 11:28:36] About to invoke devcon with cmd: remove, in install step: UninstallDriver
[Debug] [09-Dec-25 11:28:36] StdOut: No devices were removed.

[Debug] [09-Dec-25 11:28:36] StdErr: 
[Debug] [09-Dec-25 11:28:36] Devcon completed successfully
[Debug] [09-Dec-25 11:28:36] Beginning uninstallation of: Meta Virtual Screen Driver - Driver package 'C:\Users\exeCAT\AppData\Local\Temp\OculusDriverInstaller\VirtualScreenDriver.inf'
[Debug] [09-Dec-25 11:28:36] Ending uninstallation of: Meta Virtual Screen Driver
[Debug] [09-Dec-25 11:28:36] Beginning check uninstall health of: Meta Virtual Screen Driver
[Debug] [09-Dec-25 11:28:37] Checking if the WUDFRd driver exists in system management
[Debug] [09-Dec-25 11:28:37] Driver exists.
[Debug] [09-Dec-25 11:28:37] Ending check uninstall health of: Meta Virtual Screen Driver
[Info] [09-Dec-25 11:28:37] Health status: -536870142
[Info] [09-Dec-25 11:28:37] FAILURE! Failed to uninstall driver: Meta Virtual Screen Driver
[Debug] [09-Dec-25 11:28:37] -------------------------------
[Info] [09-Dec-25 11:28:37] Successfully unregister magic directshow filter.
[Info] [09-Dec-25 11:28:37] Successfully unregister magic directshow filter.
[Info] [09-Dec-25 11:28:37] Successfully unregister magic directshow filter.
[Info] [09-Dec-25 11:28:37] Successfully unregister magic directshow filter.
[Info] [09-Dec-25 11:28:37] SUCCESS! Uninstalled driver: 
[Debug] [09-Dec-25 11:28:37] -------------------------------
[Debug] [09-Dec-25 11:28:37] About to delete temp directory
[Debug] [09-Dec-25 11:28:37] Deleted temp directory
[Debug] [09-Dec-25 11:28:37] Reading --ODIVersion string from registry.
[Debug] [09-Dec-25 11:28:37] Read --ODIVersion string from registry: ''
[Debug] [09-Dec-25 11:28:37] Writing --ODIVersion string to registry: 'Unknown (failed unistall)'
[Debug] [09-Dec-25 11:28:37] Wrote --ODIVersion string to registry: 'Unknown (failed unistall)'
[Debug] [09-Dec-25 11:28:37] Ending uninstallation
[Debug] [09-Dec-25 11:28:37] 
status: False
[Warning] [09-Dec-25 11:28:37] Driver exists
                        Error Code: -1
                        Install Step: CheckUninstallHealth
                        Sub Install Step: DoesDriverExist: Meta Virtual Screen Driver
                        Severity: Warning
                        Line Number: 470
                        Caller: CheckUninstallHealth
                        ODI Version: 1.21.5.0
                        File Path: D:\full-fbsource\arvr\projects\oculus_pc_infra\Support\OculusDriverInstaller\OculusDriverInstaller\Driver.cs

One of the suggestions was to install the app on a different internal storage, unfortunately don't have that. You can try it in cmd `Setup.exe /drive=D`

Yesterday it was working completely fine, this morning no :/