What you're describing is actually how Apple currently designed the keyboard backlighting to behave under iPadOS. The backlight relies entirely on the ambient light sensor on the iPad itself (not the keyboard), and the system manages brightness automatically. Unfortunately, the latest version of iPadOS, still doesn't offer any manual override for the backlight brightness.
The setting you're seeing under Settings > General > Keyboard > Hardware Keyboard is misleading. The “Automatic” slider appears, but you can’t interact with it unless the keyboard backlight is on and the system thinks it’s dim enough to warrant it.
There is one potential "work around" that I am aware of, but it's more of a kludge, than a fix.
Here’s that workaround:
- Cover the ambient light sensor (it’s near the front-facing camera on the iPad) for a couple of seconds. You might notice the keyboard backlight turn on.
- While it’s lit, go back into the Hardware Keyboard settings—you might now be able to interact with the backlight brightness slider. Try sliding it toward the right.
- Uncover the sensor. Sometimes this “tricks” the system into retaining the brighter setting for a while.
Again, not a real solution, but worth a try.