It’s definitely a software issue. I have a Magic Keyboard as well, 2021 iPad Air with cellular (4th gen). My Magic Keyboard worked great on ipad os 18.6.2, then I decided I wanted to update to iPad os 26.1. Now my trackpad doesn’t work when selecting apps from my dock, scrolling sideways through apps, or scrolling up and down. It works with three finger gestures sometimes, for example switching apps and viewing open apps, and I can move the pointer around and click on most things. I use mine everyday, and it worked literally a couple minutes before i realized i could update, then after suddenly i have these issues. It seems like to me they have a bug with the newest version of iPad os 26 regarding the trackpad on magic keyboards, others have told me they have the same issue. I hope they fix it soon, because this is not the quality i expect from apple. This update ruined my experience with a very expensive product from them, that I’ve enjoyed greatly up until now.