Hello! Kai from the Cider team here,
There were several issues with the implementation for Local Files in Cider Classic. Cider 2 is a complete rewrite of the app, with improved performance and more features. Local file support is not planned at the moment, as implementing such a thing would be jank at best and client breaking at worst.
Sorry for the confusion!
A workaround is to download the Official Apple Music app from the Microsoft Store and upload local files through there, or upload them through the Apple Music app on MacOS.