We've narrowed this down and could really use some support from Apple.
This game uses the same MPC technology that we use and it is easy to replicate the issue on iPadOS 17.4. You must be disconnected from Wi-Fi, but still have the adapter enabled. (We disconnect via the iPad control center.) The pair of iPads will only stay connected for about 30 seconds before disconnecting.
https://apps.apple.com/us/app/p2p-rps/id1555103689