I didn't report this on BugZilla because I wasn't 100% sure that this is isn't intended behavior or that it is a duplicate (though in the searches I did I couldn't find this being mentioned). However, I do know that this occurs upstream as I replicated this on KDE Neon after finding it on Fedora 37 KDE. [bug]
Basically when you expand a folder on the desktop (including linked folders) using the up arrow when you hover on that folder and then click and drag anywhere on the desktop (leaving it expanded) even without holding the folder directly it still drags it and it feels very odd.[/bug] But again it's possible this could be intended behavior so I wanted to ask.

Sometimes I found that the upper half of the folder icon appears cut off when you do this.