Yep, you’re right, Reveal in Finder and Reveal in navigation are discrete commands that take the user to different places. As @ariehen asked, what Obsidian version and installer are you using? (Obsidian > Settings > About)
My vault is on iCloud Drive, so the location should be fine. The icons displayed look like they are from an earlier install of Obsidian, so that might be the issue.
Under Apple > System Settings > Privacy > Files and Folders is there anything there restricting Obsidian’s use?
Ups, yes, I was on a super old version from 2021! (I am traveling with a laptop where I had downloaded Obsidian before it even had an About dialog with a version!!!)
New version sorts it all. Thanks @ariehen and @eightning for chiming in and trying to help!