MacOS Annoying Bug for years, still bugging me...

FWIW, it's not a macOS bug, it's something local to your machine. I have 5 Macs and enabling/disabling the Desktop in the Sidebar works as expected on all of them.

You can try…

1. deleting ~/Library/Preferences/com.apple.finder.plist, then relaunching the Finder.
2. create a new user and test
3. Open in Safe Mode and test: How to use safe mode on your Mac - Apple Support
4. Reset NVRAM: Reset NVRAM or PRAM on your Mac - Apple Support

Are you by any chance using the iCloud Desktop thing?

That may change the behavior . . .

MtD

After you uncheck Desktop, close the Finder Preferences Pane.

MtD

Your other choice is, in any Finder window, simply drag Desktop out of the sidebar and away from the window to remove it.

MtD