Prius damping adjustment fault

Sounds like a suspension issue. The error and bumpy ride point to that. Have you checked the basics? I'd start by looking at the cable and plug connections to the suspension components. A loose or damaged connection could cause those symptoms. It's like a loose wire on a lamp – no juice, no light.

Could a defective cable or plug really cause all those issues at once?

Yep, it's plausible. The damping system relies on those connections to function correctly. If the signal is interrupted, the system can't adjust properly, hence the error and the rough ride. Like a dimmer switch not working – the light flickers or doesn't work at all. But if you are not comfortable doing that yourself, I would suggest going to a workshop.

Thanks for the advice. I checked the cables and plugs, but couldn't find the issue. Took it to the shop, and it was indeed a defective plug. Repair cost 95€. Everything is working fine now.