GmsCompatConfig version 16 is now in the stable channel of our app repository. It resolves the Play Store trying to update itself and Play services to unsupported versions. It's now back to requesting user install an update which only adds split packages.
We're not planning on addressing this for the legacy 3rd generation Pixels which are completely insecure at this point due to lack of full security updates. You can keep sandboxed Google Play working there by rejecting requests by the Play Store to update it, or reinstalling it.
If you accepted these self-update requests from the Play Store on legacy 3rd generation Pixels, you need to uninstall both Play Store and Play services followed by reinstalling them from our app repository. Don't uninstall/reinstall GSF or you'll also need to uninstall/reinstall every other app depending on GSF directly including most of the apps depending on Play services. GSF only gets updates alongside major Android releases and isn't updated via the Play Store in practice.
Accepting those update requests is fine with GmsCompatConfig v16 again.
We do it this way is so that we're responsible for testing and approving each Play services and Play Store update through our app repository while still supporting installing additional split packages for these apps with extra locales, etc. via the Play Store. Works well again.