Combine Files button does not work for valid Excel files in Power BI

I have the exact same problem and solved it by following the steps explained by Wynn Baum in this YouTube video and summarised below:

1. create a normal query which reads and transforms the first file,
2. turn the filename of the first file into a parameter and insert the parameter into the query
3. turn the query into a function 
4. then create a new query which has one column showing the list of Excel files in the appropriate folder
5. to this list of Excel files, add a new column via "Invoke Custom Function" and choose the created function
6. expand the column to reveal all data of all files

That worked like a charm.

In essence, you manually re-create what the "Combine Files" button is doing automatically.