Strange location of DNG files

It's actually not a bug. You could call it a 'case sensitivity mismatch' between Lightroom Classic and your OS. The only way to prevent it is to store your images on an external drive and format that drive case-sensitive. Basically, what happens is that you have two different folders, one called ‘XXXX’ and the other one called ‘xxxx’. In other words, the names are the same, except for the capitalisation of one or more letters. Because MacOS and Windows are case-insensitive, your OS sees those two folders as one and the same folder and so it deals with this without you even being aware of it. You will only see one folder in the Mac Finder or Windows Explorer. But Lightroom is case-sensitive, so Lightroom does see two different folders. How and why those two folders are created is often a mystery. Sometimes it can be traced back to two different users names that only differ in capitalisation, such as 'john' and 'John'.