So I created a new VM, and before running "sudo apt update && upgrade" I always install apt-listchanges, apt-listdifferences, and apt-listbugs. Then I ran the update command and got the error/bug "libqt5network5 Bug (apt-listbugs) "depends on libssl3 but loads (wrong) file provided by libssl-dev instead".
That bug is preventing what should be a simple command and is possibly what set off my Windows Defender.

This is completely unrelated to your initial issue. If you install apt-listbugs, it will tell you about some bugs that have been reported on the Debian bug tracker. But I don't think it's very relevant for Kali.

Windows Defender blocked that part of the VM, saying "file: C:\Users\USER\Documents\Virtual Machines\Kali Linux 2022\Kali-Linux-2022.2-vmware-amd64-cl1-000002-s017.vmdk" allows remote access to the system it is installed on, which essentially broke the VM, unless I decided to Allow the affected file on my PC, which I did not.

Kali is a system that provides tools for penetration testing. It's likely that Windows Defender (or similar) will think that these tools are malware. If you let Windows Defender block a part of your Kali VM, then it's not going to work anymore, you just broke your Kali VM. You should tell Windows Defender to allow the files that belong to the Kali VM (in tihs case, any file under C:\Users\USER\Documents\Virtual Machines\Kali Linux 2022).

You can have a look into C:\Users\USER\Documents\Virtual Machines\Kali Linux 2022\: all the *.vmdk files are different parts of the virtual hard disk of the Kali Linux VM. So if Windows blocks one of these files, in effect it's a bit like if you just wiped out a part of the Kali hard disk, I guess. It just can't work after that.

This report has been filed against an old version of Kali. We will be closing this ticket due to inactivity.

Please could you see if you are able to replicate this issue with the latest version of Kali Linux (https://www.kali.org/get-kali/)?

If you are still facing the same problem, feel free to re-open the ticket. If you choose to do this, could you provide more information to the issue you are facing, and also give information about your setup?
For more information, please read: https://www.kali.org/docs/community/submitting-issues-kali-bug-tracker/