Yes, it is TLS encrypted, but you can decrypt that. As far as I know, there isn't other encryption.

Even then you would need do that everytime because it could change at anytime or after updates. There is also nothing stopping them from detecting a MITM and acting differently.

How would you go about decrypting that traffic? I guess some kind of proxy, but I would assume that Windows would use certificate pinning so as to avoid MITM attacks. Another option?

I never saw anybody able to decrypt Windows telemetry traffic.