No. You don't need to build an image. You modify the DTB by editing the files on the micro-SD file system (you need to mount it/work as root from another linux system). But it should be the last option you try since you are "kind of new to this ...".
Don't worry about the "Failed to start console-setup...." it mostly affects the way the console "looks" on your HDMI monitor.
The USB enumeration is more of a problem. It suggests that your port/cable is not working properly.
Since you are "new" at this, may I suggest a few things:
1. power the board using the "DC_IN" micro-USB port with a good USB supply/cable 5V/2A.
2. use the "OTG" port with your OTG cable and USB keyboard only (important).
3. use KISS: flash and boot the simplest images (no desktop, I like debian, ...)
4. test the keyboard (ONLY device attached to the OTG cable, no hub/mouse/... ). IF it does not work, try a different OTG cable with the same keyboard and without rebooting.
5. if it still does not work for you then flash an Armbian "current" image (maybe Armbian_23.8.1_Bananapim2zero_bookworm_current_6.1.47_minimal.img.xz), then edit /etc/modules and comment the "g_serial" line (as root, on the micro-SD card, put '#' as the FIRST character on the line) and repeat the previous steps.
As I mentioned earlier, be VERY methodical (work on one issue at a a time), it will work.
By the way, how are you reading the boot log messages? USB serial/UART cable or mini HDMI to monitor cable?
P.S. If your networking skills are good AND you have a USB-Ethernet adapter, you can use it instead of the keyboard and check your router for the IP lease issued to the USB-Ethernet MAC address, then you can SSH into the BPi-M2-Zero using that IP ...
ie. once you get the micro-USB host mode enabled/restored, a lot of USB devices will "just work".
Hope that helps.
Keep tinkering.