MacOS – iCloud folders visible in Finder but not in ‘file upload’ dialog in Safari, how to enable this

I just had the same problem. It may seem that the fact that I have my Photos library on an external drive causes it.

In Apple Photos, I saw in the Preferences dialog (tab General) a button "use as System library". Pushing that solved my issue.

The kind of items in your case hidden are named Favourites. To show them, go to a site where you can upload a file (e.g. https://encodable.com/uploaddemo/) and then click on "Choose File", like you said. When you are prompted to upload something, just hover your cursor on the Favourites line, located on the top of the sidebar. A "Show" button will be shown (no irony, at all). Click it and all of the items will re-appear. Done!

If you have any more issues with this, feel free to comment.