Why is this object's type resolving to one side of a type union?

Because Math.random() can be known only in runtime, TS is unable to make decision about a type.

So I think TS just don't takes into account Bar type at all. That's why you have never.

Further more, TS plays bad with spread operator.

But I'm not convinced yet :)

I was wrong in my comment. TS in operator behavied like a typeguard, but since TS 3.8.3 it is not typeguard anymore:

// TS 3.7.5
interface Foo {
    bar: string;
}

type Bar = Foo & {
    baz: string;
}

const produceBoolean = () => Math.random() > 0.5;

const obj:Foo|Bar = {
    bar: 'baz',
    ...(produceBoolean() && {
        baz: 'bar'
    })
}

if ('baz' in obj) {
    console.log(obj) // Bar
}

if ('bar' in obj) {
    console.log(obj) // Foo | Bar
}

Playground

//TS 3.8.3

interface Foo {
    bar: string;
}

type Bar = Foo & {
    baz: string;
}

const produceBoolean = () => Math.random() > 0.5;

const obj:Foo|Bar = {
    bar: 'baz',
    ...(produceBoolean() && {
        baz: 'bar'
    })
}

if ('baz' in obj) {
    console.log(obj) // never
}

if ('bar' in obj) {
    console.log(obj) // Foo
}

Playground

I don't understand why they made such a decision.

Further more, if you remove explicit typing:

interface Foo {
    bar: string;
}

type Bar = Foo & {
    baz: string;
}

const produceBoolean = () => Math.random() > 0.5;

const obj = {
    bar: 'baz',
    ...(produceBoolean() && {
        baz: 'bar'
    })
}

if ('baz' in obj) {
    console.log(obj) // baz is still optional
}

baz property will be still optional.

I think the reason is the same as Object.keys() always returns string[] instead of expected keyof T - because of mutability

Feel free to criticize me

Your type Bar is defined as a subtype of Foo, so the union Foo | Bar is actually just equivalent to Foo. By analogy, if outside your house there is either a tree or an oak tree, then more simply we can just say there is a tree.

After seeing that this behavior was different a few versions of Typescript ago (3.7.5), and deciding it seemed like a bug, I opened an issue on their issue tracker here: https://github.com/microsoft/TypeScript/issues/42771

They have just labeled it as a bug as well, so for now I guess I'll mark this as answered with the answer being, "It's not working as intended."