It started as described, then worsened. Forced restart, hard reset to factory settings, setting up as new, deleting and reinstalling FaceTime... all multiple times in different order, on WiFi and using MacBook Air without installing backup... image still freezes but audio continues for a couple of minutes. I also figured out by chance that the back camera wasn't working (black screen when attempting to take a photo while FaceTime was in PIP and pushed to the side) but that eventually was spontaneously resolved.
Now I'm having difficulties with FaceTime on MacBook Air M1 running Sequoia 15.0.1. Error: you need to activate FaceTime & An internal error occurred. You need to quit and open FaceTime again.