Embedded app always loads “Example Domain” instead of app UI

One thing you could try is to add a shopify.web.toml file, see docs: App structure

This tells the CLI that your app has web components and should update URLs. There was a similar issue previous which this fixed updating the URL: Issue with shopify app dev not updating URLs after upgrading CLI - #13 by Lennard

Also have you run shopify app dev clean and then shopify app dev again?