Instagram (the provider) will transcode for compatibility but likely the preview is before transcoding, the assumption being that the device that uploads the video is able to play it.

Yes that sounds spot on.

I don't know instagram, but I would expect any provider to be handle almost any container/codec/resolution combination going (they likely use ffmpeg underneath) and generate their different output formats at different bitrates for different playback devices.

Either instagram won't accept av1 (seems unlikely) or they just haven't processed it yet as you infer.

I'd love to know why your commend is greyed out.