Most likely a classic UI race condition or state management glitch with the UI which is common as Community Custom Connectors are in beta and under active development. Interfaces and behavior are subject to change.

What's likely happening here is that the initial page load is failing to fetch your existing connection metadata before rendering the component. Because the UI doesn't see any existing connections in that split second, it defaults to the fallback state of prompting you to create a new one. That immediately trips the CREATE_CONNECTION permission error since your role is properly restricted to USE CONNECTION.

Refreshing the page forces a clean state reload, allowing the backend API call to resolve properly and populate the drop-down. Your USE CONNECTION grant is perfectly fine, the workspace UI is just getting ahead of itself on the initial load.

You can document the behavior for your team and file a bug here.  If you are rolling this pipeline out to a production environment, keep an view on the behavior during updates as frontend caching and routing bugs like this are usually patched silently on the road to General Availability. You can try using Managed connectors if feasible.