You should be able to use the asset without the demo scene. Here's what I tried:
1. Created a new 2022.3 project
2. Imported the Ultimate Character Controller 3.2.1.
3. Open the Item Types Manager. I got the same errors as you did with "An ItemCollection must be selected".
4. Selected the Create button. The script was created and I'm not missing any references:
View attachment 13695
I know you said you deleted the folder, but do you still have parts of version 3.1 imported? There could be a reference conflict. Can you try reproducing the same steps that I did in a new project juts to be sure we are getting the same results.