There’s two bugs here.
Firstly, the dialog isn’t rebuilt properly before it’s re-shown. To see this, open a fresh observation and click on a photo flag to bring up the five-option dialog. Then cancel it and click the flag link at the bottom of the page. You should now see the same five-option dialog, only with “Flag This Observation” at the top.
Secondly, there’s a design flaw affecting all dialogs on the site, which creates an accessibility issue. Some people need large fonts to see all the content properly, which effectively reduces the size of the browser’s viewing window. If there are elements on the page with their overflow css property set to “hidden”, this can result in inaccessible content (which is the problem being reported here). To see this, open a flag dialog and either resize the browser window smaller, or increase the zoom. At some point, the bottom of the dialog will be cut off and become inaccessible (because scrolling has been disabled). AFAICS, there’s no practical reason why the page should force this behaviour, so it seems like a pretty clear design flaw.
It’s worth doing a little experiment to see how things should work. To try this in Firefox, start with a fresh observation in a normal browser window, and open a flag dialog. Then open the web developer tools, click on the inspector tab, and use the selector tool (top left corner) to select the greyed out backround element on the page. Now go to the rules tab in the side-bar on the right, scroll down a little until you see overflow: hidden, and change its value to “auto”. After closing the web developer tools and resizing the window or zooming, you should now get a normal scroll bar which makes the whole dialog accessible.
PS: I only tested using Firefox 143.0.3, but I assume similar issues will occur in other browsers.