TOPIC:

When I open the Photos-Music-Sound Effects section of the browser and try to drag pictures from the Photos app, weird things happen.
Either the picture in the timeline has a "Missing remote media" alert or it is blurred or it is tiny.
The so called "remote media" is on my internal drive (NOT the cloud).
When I reverted to FCP 10.6.5 everything behaved normally, so it looks as though this could be yet another bug.
Could you please check whether you get the same ill effects.

I'm seeing similar. In my case, the timeline shows missing, viewer shows image. Photos are all on the boot disk.

Move playhead to something else and back again, now viewer also shows image as missing.

Switch over to project browser, change focus to timeline with playhead on "missing" photo, hit Shift-F to show it in the browser, right-click to reveal in Finder, and the path was quite a surprise.... then change focus back to FCP and the correct image appears in the timeline and browser. Missing Media indicators gone.

That's a bug.

NOTE: This is only when using the Photos media browser. Importing directly from disk still works fine.

Thanks for checking.

Normally I use the Import window but for some unknown reason I tried this method and discovered the problem.