I found the issue! Turned out to be the naming of parent folders that confused PathUtil to read a parent folder as a class folder.
My path looked something like this:
'C:\...\@Something\app1.mlapp'
Which led PathUtil.getAppRunCommandFromFileName to return the following line as TRUE:
isFileDirectlyInClassOrPackageFolder = PathUtil.fileDirectlyInClassOrPackageFolder(fullFileName);
Therefore leading to command evaluating to "Something" instead of "app1". When that command was returned to AppManagementService, it attempted to execute "Something", which did not match the filename.
Moving files to a path that did not have an @ character at the start solved the problem. Having no experience with classes, I had no idea the class folder naming convention existed. Here I just wanted certain document folders to always be displayed on top when sorting alphabetically. I guess there must be better ways of doing that...