Hi Michael,
Thanks for the reply, I wrote out this long response after working through your questions, but I think I figured out the issue.
Answers:
1) In the Activities tab, the system hung on the source retrieval while waiting for the user response
2) No connection issues in powerapps.com
3) The issue affected other users as well
4) I believe the connection is via Power Platform connector when looking at the Knowledge tab
Context:
1) Relatively new SP site (1 days old)
2) Authentication to Agent is via Entra ID
3) I have permissions to site and can access contents
Problem:
1) When I trying to add knowledge for the first time to the new site a few days earlier, I could not find the SP site in the "Browse items" navigation. So instead, I manually entered the SP link for each knowledge source. This seemed to work as far as adding files:

3) After checking yesterday, I am now about to locate the SP site in "Browse items" and can select specific files to include. I did some testing when I repopulated the knowledge files and it works.
Long story short, just wait until the new SP site is fully active and searchable in "Browse items" before adding knowledge files from that location. I was a little too eager to build. Now, when it prompts me to give it access, it is able to retrieve data from that source.
Hope this helps someone!
Thanks Michael.