I moved the Sort block inside the WordPress Archive Search to make it appear next to the search bar. The preview in the back-end shows fine, but when previewed on the front-end, the Sort block is showing the short code inside the list box.
Also, the Sort block is showing the following message, so I assume it should work properly if placed inside the WordPress Archive Search:
This block must be placed inside WordPress Archive Output, WordPress Archive Search but not inside WordPress Archive Loop
And when I moved the Sort block back to its original location, i.e., inside the WordPress Archive Output, the Sort block shows fine on the front-end.
Thank you for contacting us and I'd be happy to assist.
Your observation is correct and this limitation is already highlighted.
( it also happens when using a blocks-based view block )
I'm afraid, I don't have a time estimate for a fix, but to show the search form and the sorting controls next to each other, you can include some custom CSS code, in the archive:
( screenshot: hidden link )