Could be that the io.balena.features.firmware: "1" label is missing. You need to set it up per the readme on this repo: GitHub - balenablocks/wifi-connect: Easy WiFi setup for Linux devices from your mobile phone or laptop, which it seems you have mostly done.
Also note the busybox shebang for the scripts: wifi-connect/start.sh at master · balenablocks/wifi-connect · GitHub. It looks like you have half the balena block wifi connect setup, and half the setup from the wifi-connect standard repo.