Confirmed. It's because desktop-icons-ng is actually an application
window. There are custom hacks in mutter to make it look like a desktop
window. Only Xorg sessions have proper native support for desktop
windows. So it looks like those custom hacks in mutter (and maybe gnome-
shell) need some work.

** Changed in: gnome-shell (Ubuntu)
     Assignee: (unassigned) => Daniel van Vugt (vanvugt)

** Also affects: mutter (Ubuntu)
   Importance: Undecided
       Status: New

** Changed in: mutter (Ubuntu)
     Assignee: (unassigned) => Daniel van Vugt (vanvugt)

** Changed in: mutter (Ubuntu)
       Status: New => Confirmed

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Desktop Bugs, which is subscribed to gnome-shell in Ubuntu.
https://bugs.launchpad.net/bugs/1936643

Title:
  Logging in to GNOME 40.2.0 causes desktop icon extension to show as
  application in Activities overview

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