Why are updates forcing the grub smt=off option?

In make the file /usr/share/qubes/templates/libvirt/xen-user.xml

With the content

{% extends 'libvirt/xen.xml' %}
{% block basic %}
        <vcpu cpuset="1-8">{{ vm.vcpus }}</vcpu>
        {{ super() }}
{% endblock %}

If you have more than 8 cores, you need to adjust the cpuset.

Try starting a qube before rebooting, to make sure everything is working.

You can use the command xl vcpu-list to check that the affinity is set to 1-8.