I have one save right before Detroit (CPU team) who is 600k under the cap and able to sign Clint Capela to a $23,841,887 1-year contract. Is this legal based on the new rules? I've seen multiple instances of these over multiple runs and scratching my head on how these CPU teams are making such offers. Is this a "sign and trade" performed between the AIs? There is no evidence of a trade happening though. There were no UFA and RFAs on the roster at that time so it is not like someone signed away a big player at the same time Detroit picked up Capella.

I then replayed as Detroit from scratch and tried to simulate this. By free agent period I was 1.6 million under the cap and I then tried to sign Clint for 23 million. I'm not allowed to.

To reproduce this:
Play as commisioner or dallas
Sim through the season up to the next free agent period.
Take note of the salary cap setup of each team.
Sim through the period and you will see one of the above odd signings.

After the recent update, I let the CPU simulate the remainder of the free agency for me, and the MLE was set to 224 million after day 3. https://imgur.com/a/x2KO2Mw

Ah yeah what you wrote is probably it. I tried your steps playing as Detroit and after a few days of sim, I got a 67 million dollar MLE available. But on the side I was seeing the CPU trying to side FVV for 26 million 1 year contract by the 5th day.

Does anyone have a file before this happens so I can just look at that one and see what is going on?

I've created the support ticket with the game save file.
Not sure if it went through as I didn't see a confirmation.

But this can be easily reproduced by starting a game as Detroit (Challenge mode, Default roster, no other changes).
Make the AI control your offseason/signing decisions, sim through the first season to get to the free agency period.
Start simming days and observing your MLE available funds and the AI offers.

This should be corrected next bulid