Got this to work, and documenting for future reference by the community…
I switched to using the docker image, but get the same error message.
Eventually, I resolved the issue by inspecting the browser console logs:
Studio is using local file access, and showDirectoryPicker is only available in a secure environment under Chrome. There is a Chrome option --unsafely-treat-insecure-origin-as-secure that allows one to specify a origin, and then Studio works.
On Mac OS the command line looks like this:
open -a "/Applications/Google Chrome.app/Contents/MacOS/Google Chrome" --args --user-data-dir=/tmp/chrome-dev-profile --unsafely-treat-insecure-origin-as-secure=http://<hostname>:3000