See if the problem is present when you boot in safe mode. That process performs some system cleanup and clears caches, and also disables 3rd party extensions that may cause problems.
Start up your Mac in safe mode - Apple Support
If that does not correct the issue, test in a new user account. A newly-created user account will have all settings at default, and if the issue does not occur in that new account then it provides guidance on what may need to be changed to correct the issue.
Add a user or group on Mac - Apple Support
Once the testing is complete, the new account can easily be deleted.
Delete a user or group on Mac – Apple Support
Those steps will help to isolate the problem.
It might help to download and run EtreCheck, written by a long-time forum member. The free version is fine. Post the full report using the Additional Text button. No personal information is revealed.
I cannot replicate the issue you describe on my 16" M1 Pro MBP running macOS Tahoe 26.7.1. When I execute a search in the Finder search bar, I can select the text in the search field (or re-select, since it remains selected by default), type new text over it, and execute another search.
If the problems still persist, then bugs can be reported to Apple here:
Feedback - macOS - Apple
