In the end I managed to resolve this by creating a new windows account and move the data there. Problem resolved.

What did not work:
- manually force the file locations for sketch, arduino IDE, ESP32 platform data, libraries etc
- install the Arduino IDE in portable mode. This fails because during ...

Sorry, I got no notification about your responses and totally forgot about my post.
The verbose hint pointed out what the problem is:

Using board 'esp32s2' from platform in folder: C:\Users\m&m\AppData\Local\Arduino15\packages\esp32\hardware\esp32\2.0.5
Using core 'esp32' from platform in folder ...

Running Arduino 1.8.15 with ESP board version 2.0.5, I am trying to program a new NodeMCU-32-S2 (AI Thinker board) as "ESP32S2 Dev Module". Even with a blank sketch (no code in the loop and setup functions), compilation fails:

& was unexpected at this time.
exit status 1
Error compiling for board ...