Hi Eric,
Since you can open folders normally in File Explorer, but applications such as Steam cannot launch them, this appears specifically related to handing a folder-opening request from another program.
As a quick isolation test, please try:
- Create a new local Windows account.
- Sign into the new account.
- Open Steam and test Browse Local Files again.
If it works, this points toward something in the original Windows user profile. If not, the problem is likely system-wide.
Hope this helps isolate where the problem is coming from.