I agree, and what I said is not trying to exonerate the car companies but is pointing out the rage-bait of the news media.
“Volvo recalls ALL…” (emphasis mine), is meant to incite worry and or rage, while something like this would be truer to the details and relevance to consumers: “Volvo software bug may obscure speedometer. X number of model affected/reported. OTA fix released.”
I’ll bet you’re right that it’s the lights, but I don’t know about “overload” of anything.
The problem with camera vision (vs human vision or LiDAR) is poor definition range. This means that pointing a light at it, like happens with emergency vehicle lights, can cause it to dim the whole image to compensate and then not see the vehicles. Same thing as when you take a backlit photo and can’t see the people.