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On RS3+ ContentDialog places the whole Content Dialog in the popup that displays it. Before this it would place only the content in the popup. The "BackgroundElement" child element of the ContentDialog is the root of what users actually see as the dialog, and that's what needs to be MaxWidth limited (and it is still correctly limited with the regression). "BackgroundElement" is then centered within the outer ContentDialog, and so when the whole ContentDialog has a size limitation, it can't extend all the way from the left window border to the right. The ContentDialog is left and top aligned within the popup, even though its HorizontalAlignment is Stretch. So "BackgroundElement" is centered within a left-aligned box, making the dialog left aligned from the user's perspective. The regressing change makes the ContentDialog's MaxWidth match BackgroundElement's, and so it's right up against the left edge of the window.
We don't have a good way to work around this behavior from Winui2 so I am reverting the change.