I assume Groove had been working fine on your phone recently.
I haven't had this problem, but have you tried ignoring the "update", uninstalling, and re-installing Groove from the Store? I was having a different problem -mis-diagnosed on my part- recently and I did the re-install without any problem. Groove will just have to find and re-read your music data on start-up, but that only took a few minutes for my 4K songs. My settings were retained in that it knew to look on my SD card. Good luck getting past this, which you will.