Allow me to start by thanking everyone involved for their hard work and creative energy that they continue to put into developing Moodle. Many changes made in Moodle 4 seem great and sensible. Unfortunately, the navigation is not one of them. I will try to make my case here as succinctly as possible, please bear with me.
So far, everyone I talked to about the design choices regarding the new tertiary navigation agreed that the drop-down select element is the last place one would expect a navigation to be. This is obviously just my opinion, but I can't imagine a worse way to design the user interface, and I don’t understand the thought process behind this. The primary and secondary navigation areas at least look and "feel" similar. It is obvious at a glance, that these represent different layers of navigation. Not so with the tertiary menu. All you see is a select element which normally represents a field of a form or a way to filter a set of items displayed on the page, not as a way to navigate "sideways" from the current page.
This is best demonstrated on the course participants page. You have the secondary navigation (Course, Participants, Grades, Reports, More), then there is the select menu set to "Enrolled Users" with a button right next to it to "enrol users". Then there are the filter elements for the list of users right below that, looking exactly the same as the tertiary navigation since they too are (rightfully) just select elements. Except that these drop-down menus serve completely different functions and require entirely different intuitions regarding their purpose.
Why would you put navigation in a select element? I understand that someone knowing the ins and outs of Moodle has no trouble figuring out, how to find sub-pages. "Well, of course, the sub-page must be linked in the tertiary navigation... Where is that? Oh, OK, they seem to have moved it to this drop-down form-field... Weird, but OK." I think it goes without saying that a regular user (teacher or student) has no idea what even the concept of the "tertiary navigation" is. People just don't find certain pages they need, like the coures-level permission settings for instance. The few that decide to check the documentation only find the breadcrumbs, but remain stuck (as I was for quite a while) on the second level.
The secondary navigation on the course level (where most people will spend most of their time) has the "More" option, which is designed obviously as a drop-down menu within the navigation context. This is entirely serviceable and intuitive because you know at a glance there are more pages here on that level.
There needs to be a clear indicator that a navigation option has sub-options (i.e. sub-pages). The previous version solved this in at least two ways that I know of: 1) The sub-pages related to a section of the site were all linked via one shared menu (the settings gear wheel) or 2) the tertiary navigation was right underneath the secondary one and designed exactly the same. Both of these again allow to navigate intuitively.
I realize this may sound like a rant motivated by conservatism, but I genuinely believe this to be an objectively inferior design choice compared to how it was before. You could argue that it is just something to "get used to" and once all the users learn this new way of navigating, it will not make a difference. But is this really the way websites should be designed? Should not the aim always be to make the interface as intuitive to the general user as possible?
I am not a webdesigner by any stretch. Therefore I cannot offer a concrete alternative suggestion other than literally saying "please go back to the way the (tertiary) navigation was done in Moodle 3". I am sure this was not the only intuitive way of organizing navigation, and maybe others will suggest them here or in other places. I just had to voice my concern in case other people/devs that are excited about the new release as I am, feel the same way about this.