Why can't I add apps to folders on my iPhone 13 running iOS 18.5?

After adding 20+ Apps or so Drag other apps to the Folder and hold it there above the folder for a while let the folder open and arrange the apps and it will create space for you additional apps.

As far as my knowledge goes it is 216 apps in a folder.

Please see a screen recording below where I have tested it for 27 apps. I would not like to test for 216 apps because I feel it is counter-productive when you already have the App Library.

I was unable to add apps to folders in the dock and taking the folder out of the dock works out for me.

Take the folder out of the dock, add the app to the folder and put it back to the dock.

Not sure if this is the issue you are getting.