I ran into this for the first time last night after running a Gen2 VM for many years. I haven't had time to dive into it, but here is what I noticed.
Windows Server 2022 Standard
Gen 2 VM, 4 cores, 4096MB RAM (not dynamic)
2 nics (WAN and LAN)
VM version 10
pfSense+ 23.05
First had an issue when I upgraded from 23.05 to 23.09. When it rebooted, it came up with the error. It sat like this for several hours until I could get to it physically.
In the boot menu, it had "kernel.old" as an option and that would allow it to boot. "kernel" would cause the error and hang.
I installed pfSense 2.7 fresh and after it rebooted, it hung with the error.
I noticed that if I messed around with the boot menu - just pressing keys to look at the options - when I pressed enter to continue booting, it would work. The next reboot would hang again.
Creating a Gen 1 VM worked fine.
I have been running this VM for years without any upgrade issues. The only thing I changed recently was upgrading the VM version from 9 to 10. I have a backup of it where it is still version 9, so I'll try restoring it and doing the upgrade to see if it still hangs.