Is the Imam considered a polytheist for supplicating "by the right of Muhammad," and is it permissible for the congregants to break away from him and establish another congregation for the Witr prayer?

The action of those who ruled the Imam to be a polytheist (mushrik) due to his seeking intercession (tawassul) through the Prophet's ﷺ honor is a reprehensible act and a legal error. The Imam is mistaken and an innovator in his statement, but he is not a polytheist. Seeking intercession through the Prophet's ﷺ honor is considered an innovation by the majority of scholars, and it does not expel its practitioner from Islam. It is permissible to pray behind an innovating Imam as long as his innovation is not one that leads to disbelief. It is also permissible to refrain from praying behind him as a rebuke, if that will benefit him. It is obligatory upon the congregation to repent for their judgment of the Imam, to apologize to him, and to return to praying behind him. As for the Imam, he must abandon the innovation and adhere to the methodology of the Ahl al-Sunnah wal-Jama'ah.