I have “Show in ‘Add New’ Media screen” enabled in the Interface → Folders. When adding new media, the dropdown is there and I can select a folder to upload to, BUT, every upload still goes to the Uncategorized folder and must be manually moved to the proper folder.
Earlier “Show in ‘Add New’ Media screen” option only showed the folder selector in the Add new media screen but it has now been improved to persist opened Folder to ‘Add New’ Media screen.