In order to be able to use Dynamic Data and also the Post Loop Builder query editor, custom post types must be both public and publicly queryable.

'publicly' => true

'publicly_queryable' => true

This means for example, if you create a CPT for 'People' or 'Staff', because you want to show them via Post Loop Builder on your About or Team page, you then also end up with a single post page and archive page for the CPT which you do not want and must redirect.

You should be able to create non-public Custom Post types and still access them in the backend via Post Loop Builder and when choosing Dynamic Data.