If you are using Ubuntu, and download KVM images from Ubuntu Cloud Images - the official Ubuntu images for public clouds, Openstack, KVM and LXD then the image provided for Ubuntu 20.x and newer does allow Docker Swarm Overlay networking to function. If you use these images, and use Swarm, you will fail to have an ingress network or an overlay network that functions as expected.
This may be an issue with virtio drivers and incompatibility with VXLAN, but the RCA is currently unknown.
The easiest fix is to use the standard Ubuntu ISO to install the OS on your KVM VMs.