Just stumbled upon the same thing (strange windows upon attempting to refactor some code after updating to Arctic Fox). After a lot of searching around the options/menus/internet this fixed it for me:
Navigate to:
File > Settings… > Editor > Code Editing
under
Refactorings > Specify refactoring options:
select
In modal dialogs
Press OK.
Fingers crossed refactoring works.
🤞
Further step: Restart Android Studio