Working with https://vyos.dev/T5593 it turns out that when performing add system image then /opt/vyatta/sbin/install-image-existing is used rather than the updated script provided by the ISO.
This will make the upgrade fail with the result that the upgraded image wont be able to boot since Linux kernel-files are missing (one have to select previous version of VyOS to get the system back online).
A dirty workaround is to start over with a fresh install (wipe the whole disk) and use the ISO where the PR's for T5593 have been merged.
Or manually extract the files needed from the ISO and place them into the persistent boot-directory on the drive.
However the problem will return next time the install-image-existing script is getting updated (rumours has it that work is in progress to replace the script with python code instead).
A better solution would then be if the op-mode add system image gets updated so it will fetch and use the script provided by the ISO instead (for example by mounting the ISO as a loopdevice during upgrade).
This way instead of doing a fresh install (wiping the disk) the user can update to the VyOS version where the updated add system image exists and from there upgrade into the version where T5593 is provided (or other tasks which affects the scripts used during upgrades).
For more information see:
https://github.com/vyos/vyatta-cfg-system/pull/209#issuecomment-1740146385
and
https://github.com/vyos/vyos-build/pull/427#issuecomment-1739978709