I actually just got this to work, YMMV since set ups are so different like my VLAN usage, etc. but it does work for me now.
The dedicated server has a built in network test that they do to ensure it can "communicate" properly. I saw some forum post on steam discussions and reddit (https://www.reddit.com/r/SonsOfTheForest/comments/14jo4y0/bug_with_the_new_dedicated_server_tools/) about users being able to play/connect even though the network test failed. Most likely it is either a bug with the network test being used or just that is unfamiliar with the way packets are being handled by pfsense.
So most of my set up was actually good and working. Setting NAT + Proxy mode allowed the self-test to pass but as stated only external friends could connect and see the server, I was unable to do so at all. A post mentioned they were using Pure NAT setting for NAT reflection - I tried that and the network self-test failed in the dedicated server. From a suggestion from a user, I tried Pure NAT again and then added the following in the server config file: "SkipNetworkAccessibilityTest": true. This skips the built-in network self-test that is problematic with pfsense NATing or either has a bug as stated.
I then was able to see the server in Steam Public List and connect properly. Side note, I am not able to see the server at all in LAN list probably due to VLAN and/or subnet differences. But that is not a big issue since I can connect via public listing. I hope this helps any other users experiencing similar issues