I'm having the exact same issue.
I installed Windows 11 (full fresh install) a few weeks ago and about 10 days ago the same behavior here. I've tried the purge fences and the clean boot and still the same thing. For now I put a shortcut to the folder as a work around. I also deleted the portal and replaced it with new portal, same directory. I use 2 portals on the desktop, spreadsheets (MS Office Excel) is the problem, movies portal works as expected.
At first I had Freeoffice installed and I suspect the problem started when I installed Office. I reinstalled FreeOffice and the problem went away. I then uninstalled FreeOffice and reverted to MS Office and the problem returned. Hope this helps. Just so you know, I still have a file download dialog box opening on a double click within the portal, with OPEN, SAVE, or CANCEL as my options.