At least with Xcode 16 beta 5 it is possible to add the package as a local dependency to the demo project.
The following steps give me the result I need:
Open Project > Package Dependencies > Add package > "Add local"
Optional for more convenience:
Add package as reference: Drag&Drop folder of target from the package into Xcode
1. Action: Reference files in place
2. De-select target
Topic:
Developer Tools & Services
SubTopic:
Xcode
Tags: