Update:
Found the issue upon a fresh install of the game it created a line of text in the gamerprofile.xml TaggingEnabled="1" 
Note: This option dose not show in the in-game menu and as such appears to be permanently on

Note: this is still a bug and requires investigation by the development team

As a workaround for PC Platform [not sure this will work for other platforms]
the community can edit the gamerprofile.xml file in Microsoft-Notepad and change TaggingEnabled="0" save and exit

@law-ii THANK YOU! IT WORKED! I don't know how permanent it will be, but for now it's an excellent work around. Here's some shorthand on law's fix for those who want to employ it:

(1) On a PC, go to:
C:\Users\(your user name)\Documents\My Games\Far Cry 6

(2) Edit gamerprofile.xml.

(3) change TaggingEnabled="1" to TaggingEnabled="0"

(4) resave

(5) play the game.

@ubistorm I am using the rocket launcher Supremo... not sure what its proper name is but its the default one.

Read @Law-II 's comment above he was spot on (taggingenabled was set to ON even though in prefs it isn't) and at least for now it's a great work around and does the job.

My preferences, taken before I did @Law-II 's fix are as follows:

Experiencing this same game-ruining bug on my PS5, and so can’t use the work around. Would love a hot fix ASAP as the game is currently unplayable for me with glowing red hologram enemies running all over the screen. Thx

@ubi-thrupney Thanks for posting. As a related but unrelated aside, I noticed in this new version that when I use the binocs it auto-tags things even through I don't want it. The fix above works everywhere else so far, but not when using the binocs. It's not as egregious as the "tag when enemy injured" situation as I can choose not to use the binocs. But if the team could make it like it used to be... where I can choose to shut it off, that would be great.

@ubi-thrupney PC Version ( Ubisoft + ) also with this bug

@ubi-thrupney
Settings \HUD \Elements \Icon
NPC's can be tagged when aiming down the sights: the setting is called Enemy Tag Icons on/off (NPC's would be tagged with or without an over head icon and would show up on the Radar)
Note: Just to clarify: to your response; there is no toggle on / off setting available in Settings \HUD \Elements \Icon menu for the bug being reported

Bug Report
However: what we are seeing is [weapon tagging / wall hack] that should only work with resolver weapon choices, as I understand these are unlocked later in the game and allow the *protagonist to shoot through walls. [*if your in to that sort of thing, I am sure it's a great feature]
Bug Report Detail
Side Note: TaggingEnabled="1" is being written to the gamerprofile.xml; Title Update 2 Deployment Nov 3rd 2021 introduced changes to the Far Cry 6.exe that updated the gamerprofile.xml in this case it wrote a new line as above which switches on [tagging / wall hack] Note: there are no options to turn this on /off within the settings menu

Phone Camera Tagging
I can also confirm that Tagging though the phone is also a bug, using [tagging / wall hack] the phone was using Enemy Tagging-Icon prior to the Title Update 2 Deployment Nov 3rd 2021 and was effected by the Settings \HUD \Elements \Icon : Enemy Tag Icons on/off (NPC's would be tagged with or without an over head icon and would show up on the Radar)

Injured NPC's
I can confirm that NPC do not get tagged when injured; this is just how it may appear in the heat of battle

"rather the whole lot was switched off" I would for sure not much of a game with it enabled, just glad I could find a workaround so I can carry on bug testing

Please let me know if you have any further questions or require details

@law-ii You also have to set EyeTrackingEnemyTaggingEnabled to 0

@ubi-thrupney

This workaround doesn't work for me despite editing the .xml file - even trying to set it to read only as well.

Set TaggingEnabled="0", EyeTrackingEnemyTaggingEnabled="0" and EnemyOutlineEnabled="0".

Confirmed HUD options are all set to the OFF preset as well and accessibility to OFF too.

Severely impairing my ability to enjoy the game and might have to put it down until a hot fix comes out.

Btw its not only enemies "xray outline", but also amigos. Last patch definetly broke this option. Im on PS5

My earlier posting on this concluded with the tech support person saying that the thread was consolidated with another of the same topic, but I don't know where that is. What solutions were offered in that thread were for changing the PC registry but I'm playing on an XBox Series X. These red enemy outlines are a non-starter; they kill the game and I wouldn't have downloaded it for free if I had known I wouldn't be able to turn them off. I'm still baffled by this. I've never had a patch actually end a game on me. Especially one so recently purchased at full f'n price. (Does anyone know how to do a full uninstall on a game? I deleted and reinstalled FC6 after this patch issue, but my personal game data must have been on the cloud or something, and it picked up right where I left off. If I can properly reinstall truly from scratch, perhaps the issue will self-resolve.)

I reverted to defaults for every option and sub-option category, then deleted all of the game save files and made sure none were available on the cloud, then closed the game and uninstalled it and all its listed components. When I reinstalled and launched the game, I figured that my red enemy outline bug would (at least for a while) be gone because I've started fresh and I'm playing on a standardized console (XBox Series X) rather than a personal computer. Nevertheless, the game-killing red outlines returned to the enemies despite the options remaining off to do so.

Question for anyone: Am I missing a step in expunging my console of the game so that a reinstall will be pure? (Short of, obviously, deleting a record that I bought it.)

Question for Ubisoft: If you bought a lawn mower from a Lowe's Hardware store, and it was working for you fine - and a few weeks later a rep from Lowe's came and fiddled with that lawn mower while telling you he's improving it, and after he leaves the lawn mower resultantly stops working, how patient would you be with Lowe's general assurances that they're working with their technicians to figure how they broke your lawn mower? In all my years of gaming I've had plenty of patches fail to fix what's broken but I've never had a patch break what wasn't to the point of essentially voiding my purchase. Even if Ubisoft's technicians are doing everything they can, we customers had better get some more GD information in the meantime.

@bccarr7 I have this problem on Series X as well since the patch. This needs to be fixed asap, it completely kills the game for players who want a more immersive experience.

Tried reinstalling but despite relevant settings set to off, enemies still glow red behind walls. First time a patch has ever forced me to stop playing a game. Every day that passes that this isn't fixed (let alone customers going without proper updates on a patch ETA, or without an optional patch to revert to the original game while the new patch is being written) is a further indictment of Ubisoft's concern for its customers.