There are many MacBook Air models. Have you verified the model you're trying to update supports macOS Sequoia?

https://support.apple.com/en-us/120282

Installer if your MBA meets requirements.

https://mrmacintosh.com/macos-sequoia-full-installer-database-download-directly-from-apple/ 

You should check this out too: https://community.jamf.com/t5/jamf-pro/macos-sequoia-hardware-compatibility-regex/m-p/319391

So... what if you know for fact that the device in question is definitley compatible with the update. Is there any way to "reset" the number of tries to get the software update to work again?

The only solution we have found is to manually update the device, but this is not a viable solution when you have 100s of devices throwing this error.

Were you able to find a workaround for this? I'm having the same issue now with version 15.5 on a Mac Mini M2.

Literally the only solution we found was to manually update to the latest OS, and that seems to reset the retries for future updates.

I found a workaround for a group of M3 iMacs. I sent a Software Update for latest minor update using the Download and schedule to install option. That completed, and then I was able to send the Latest update based on device eligibility command successfully. I had opened a ticket about the issue, and Jamf's response was to switch off the Software Update feature for five minutes, which would kill all pending commands, then turn it back on and try again. I don't know if that would work, it's a different approach, but also worth trying if my workaround doesn't help.