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I was using the RadzenDropDown inside Chris Sainty's Blazored.Modal component. Apparently, filtering with the RadzenDropDown does not work inside a this modal service. Maybe there's a code conflict in the underling components.
I realized that Radzen has a modal service.
When I switched to the Radzen Dialog Service it all works fine.
I guess the take away is to not mix and match the components from different sources, or at least to keep it at a minimum.