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[David Edmundson]

> are we sure that this is an upstream QT issue?

It's where I would bet on. But lets not rule anything out.

Does this also happen for the context menu on the desktop as well as
folder icons?

Can you add a debug of     m_menuPosition just before menu->popup in
plasma-desktop foldermodel.cpp

If that looks right we know it's Qt.
QMenu has code to keep things on screen, and it's fairly naive. It
even goes via QDesktopWidget to get the screen co-ordinates for a
given point via screen indices.
That also implies we have some Qt6 patches that must have been written
that we could try and backport.

David