I recently found this too...
When looking into it, I found there's a fix added in /core/modules/ckeditor5/css/ckeditor5.dialog.fix.css with:
.ui-dialog ~ .ck-body-wrapper {
--ck-z-modal: 1261;
}
(Drupal 10.2.5)
`.ck-balloon-panel` is a child of `.ck-body-wrapper` with: `z-index: var(--ck-z-modal);`
However, when I look in the DOM the ck-body-wrapper div is appearing before .ui-dialog modal. Then I found the Drupal core issue related https://www.drupal.org/project/drupal/issues/3328425 π CKEditor 5 balloons invisible when CKEditor 5 is used inside a modal Needs work
Looks like it's a core bug rather than an issue with Layout Paragraphs.
Kirst25 β created an issue.
Kirst25 β made their first commit to this issueβs fork.