I have some Local Files and they show up on my PC and moved them to one of my playlists and it works just fine. It also appears on my phone's app, but the titles are grayed out with a "!" under the title as seen on the screenshot. And whenever I tap on the title it doesn't play at all. Both apps and OS on my phone and PC are all up to date.
I did this some time last year and it worked fine, but now it doesn't.