It doesn't let me play with more than two people in my local game

If you're playing on the XBOX S you are, unfortunately, limited to just 2 players you can host. XBOX X and PlayStation are limited to 4.
 
Hi there, judging by the watermark on you screen you are using Windows and not Xbox as the platform you specified. Are you still having this issue? If you are your log files would be very helpful, the are located in user/AppData/Roaming/7DaysToDie/logs. User would be replaced with your windows user name.
 
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