I really feel bad about jumping the gun and misattributing the coincidental release of 16.3 and the unusually small POTD with the problem being fixed, even though I made it clear that I'd continue to check it wasn't just the smaller resolution. Since it's been days since my request for opening, I'll go ahead and reopen it back to Medium as it was.

As I feared, it isn't really fixed. Yesterday's (UTC) photo was just small. Today's photo is 5,880 × 3,920 pixels and the widget (all sizes) is again not working.

After updating to iOS 16.3, which was released yesterday, the POTD widget is now fixed for me, all three sizes.

Sorry for the late reply @Dmantena

I created the first report here, and it is definitely not fixed. Appreciate all the efforts.