This broke in 2.205 because of the Winstone update that changed the 404 error message format.
The form validation expects a message to occur in a 404 error response and it seems it no longer matches exactly. That's the only difference between the "404 Not Found" error, and "This is a previously set up resource domain".
I put a custom logo override into userContent and it is working which leads me to believe the resource root url setting is working, however the check against /instance-identity/ is failing in the configure page.
This is correct; it's just the form validation that's affected, as it can no longer distinguish a 404 response from a resource root URL from just any other 404 response.