SharePoint Online - Issues Saving Site as Template and Activating .wsp Solutions

Hello everyone,

Recently I have been experiencing issues when saving a SharePoint site as a template and activating .wsp files within the Solution Gallery. This appears to be a recent change, as the same process and templates have worked successfully in the past.

I wanted to see whether anyone else has recently experienced issues with SharePoint site templates (.wsp) in SharePoint Online.

Findings:

• Site type is a Classic Team Site.
• Custom Script is enabled (DenyAddAndCustomizePages = Disabled).
• The .wsp file is successfully generated and appears in the Solution Gallery.
• The .wsp file does not activate.
• Activation fails with the error:
  • "Activation of solutions with sandboxed code has been disabled." - Prior to this, SharePoint was only displaying a generic "Sorry, something went wrong" error. (All I did was turn content approval on and off in the Solution Gallery Library)
• Previously working .wsp files also fail to activate.
• The behaviour has been reproduced across multiple Microsoft 365 tenants.
• A Microsoft support ticket has already been raised.

Has anyone else encountered this behaviour recently, or is aware of any changes affecting .wsp template activation in SharePoint Online?

Thank you in advance for any insight or suggestions.