Unable to update OS or packages

WOW

That rule leaves open access to any device that connects to it. That is not default.

Please run:

sudo mv /etc/udev/rules.d/20-hw1.rules /root/20-hw1.rules.disabled

sudo udevadm control --reload

sudo udevadm trigger

The reason we are renaming that file instead of wiping it entirely is because, while that is a glaring security risk I Do Not Know why that is on your computer.
I recommend you check what you have installed or what scripts you have run, though...

Could it have something to do with the Microsoft Surface Linux kernel? That is the only script that has been run outside the default install as far as I know? Will running the above commands be likely to cause any boot issues or hardware issues do you think?

No, they won't. You will have full functionality of the computer.
But it may affect a specific application (the reason it is there) or a specific peripheral (Webcam, maybe...) if you have an odd webcam or similar device that needed a lot of configuration to get it to work.

I cannot say with certainty "absolutely not."
Because I am not intimately familiar with all of the scripts included in the Surface Kernel.
But it would strain credulity that such a broad permission scope was included so haphazardly in the Surface Linux kernel.
It would be way down my suspect list.

Thank you so much @Aravisian and everyone else for your troubleshooting and solution to this problem! I have rebooted after running the last commands and everything seems OK and I was able to run the upgrade and update commands afterwards with ownership returned to root.