It might be a more extreme method, but I use Pi-Hole on my home network running on a Raspberry Pi.
It's more investment than tweaking some Windows settings or configuring a router, but it does a decent job of blocking a lot of telemetry and tracking.
Most of my denied queries listed on the Pi-Hole dashboard are Microsoft based.
I have to use my Pi-Hole as my DHCP server though, otherwise all traffic seems to only come from one device... my router.
If you have a server running at home, Pi-Hole can also be hosted in a Docker container.
I'm afraid I don't know too much about that.
I use uBlock Origin in Firefox and that is basically all I use on my PC and Pi-Hole does the rest.
Pi-Hole has some default rules that do a decent job and most people just rely on those, you can add your own or apply additional rule lists but the more you add, the greater the chance you break or block something legitimate.
Whatever blocker or rules you use will need updating once Microsoft or whoever makes changes, and some might react faster to the changes than others and they will most likely never react instantly. Something will always get through.
I don't think there is a definite solution that will always work, these large companies will always make changes and try and bypass our protections and all we can do is react to that.
The only way to truly stop all M$ telemetry is to not use their services but I am not going to tell anyone they need to move over to a non-M$ system because I know it's not just that easy. I have software and games that only run in Windows so I am stuck with their slop for now.
Maybe someone will be able to suggest another method that will suit your needs.