"This site is on hold" when attempting to replace root site

This is caused by a retention policy, open https://compliance.microsoft.com/, Information Governanance, Retention policies, find any policies applying to Sharepoint sites and exclude the site using it's URL. Note: the interface here is odd, you have to add the URL, then select it again before pressing done otherwise it doesn't save. Also exclude the current home site (in case you are replacing one).

Difficult to help here with this problem, best you can do is to open a support ticket