Hmm, that’s an odd failure to be getting, it seems related to the ISO image file itself rather than the root disk too.
Can you try importing that ISO into incus itself rather than passing it in as a file?
You’d do that with:
incus storage volume import incus-storage-pool win11-install /home/rkurichi/win11.lxd.iso --type=iso
incus config device remove win11 install
incus config device add win11 install disk pool=incus-storage-pool source=win11-install