The problem is that this given permission doesn’t show in Files & Folders, and after turning it on and off there it still persists. The only way to revoke it is using some CLI command and restart the computer.
You “feed” it the document.
Same way you select a picture on iOS. It is your deliberate decision and intent to open the document with that application.
That is totally different from the application having permission to scan and view anything in for example the downloads folder
That's not what's happening here. Forget about the first 5 steps. If you install the app and start from step 6, the behaviour will be the same. If the user chooses the Documents folder in the browse window in an app, the app can use the contents of the Documents folder without the need for that permission in the Settings page.
The Privacy settings applies only to access to the Documents folder without the user interaction.