Disclaimer: I don't use Interstellar, just making an educated guess. TL;DR This is expected. Pick the "Threads" mode to use Lemmy, others will have limited or no functionality.

The mode picker is for what kind of app you want Interstellar to be. "Microblogging" is Twitter-like and expects the selected server to run Mastodon or similar. "Threads", unrelated to Meta's trademark, is Reddit-like and expects the server to run Lemmy, Kbin or similar. The correct mode needs to be selected so that the app knows how to interact with the server via the ActivityPub API, which has different feature sets for microblogging, threads etc. For example, it will try to fetch a list of communities if you select Threads, or a list of trending hashtags if you select Microblogging. Some features are shared so you might be able to for example view Loops videos in a Pixelfed-like UI.

@AyeSenor@kbin.earth The other replies are correct, Microblogging only works on Mbin. The app isn't even supposed to let you select Microblogging while using Lemmy though, so that actually is a bug.

It's because Lemmy doesn't support microblogging, it's mbin-specific feature, I'm a bit surprised you can even select it when using Lemmy