adb sideload lineage.zip yields adb: failed to read command: No error TL;DR
Trying to sideload Lineage, I hit a brick wall getting the following error:
D:\Setups\XXXXX\Lineage FP3\platform-tools_28.0.2(ADB_1.0.41)&gt;
    adb sideload lineage-17.1-20210104-nightly-FP3-signed.zip
adb: failed to read command: No error

The phone displays Timed out waiting for fuse to be ready. simultaneously.
Setting:
I'm trying to install LineageOS on my Fairphone FP3+ using Windows 10. Through workarounds including first difficulties and exploiting the manufacturer flash all .exe, I was able to boot the Lineage recovery and start sideload. adb devices returns the following:
List of devices attached
A2XXXXXXXXX1    sideload

The phone display prints Now send the package you want to apply to the device with &quot;adb sideload &lt;filename&gt;&quot;...
Problem:
I now enter adb sideload lineage-17.1-20210104-nightly-FP3-signed.zip, paying attention on having the archive in the same folder as adb (that's the default way, even if about to change). The result was

either adb: failed to read command: Connection reset by peer with aparent restart of the recovery boot
or a adb: failed to read command: No error in the cmd, giving me Timed out waiting for fuse to be ready. on the phone. I don't trust that error as it doesn't time out by waiting but in an instant after sending the sideload command.

I also double checked and cross-switched the cable, USB port, downloads, software versions (Lineage and recovery/ADB), as well as un- and reinstalled all respective drivers.
More references:

Manage the bootloader of your FP3/FP3+
Manually install Fairphone OS on FP3/FP3+ (from part &quot;Setting:&quot;, in the process leads to this link from above for Windows)

I also went through these possibly related questions on this site among others:

Android adb sideload command
adb sideload CM,it shows error
The solution in this very specific case seems to have been reinstalling the host OS (in my case Windows 10). I suspect it to be a driver issue of some sort as the reinstallation of everything used the exact same setups, files etc. I could guess into some of the multiple DisplayLink-ish software I tried to use for my tablet as secondary USB PC display. (Such as Superbrush, Super Display, VirtualTablet, WiredXDisplay, spacedesk and so on, I tried a few.)
While this is not a direct answer to the question, I hope, it could help other people stuck like me. The exact same procedure led to the desired, previously blocked resullt.
TL;DR:
Try a different host device or new installation (of the host OS) instead of giving up!