If we refer to this document: IP Discovery for Virtual Machines
Behind the scenes, DFW requires associating VM and its vNIC with IP address.
So DFW need to find a way how to get the IP address of the VM/vNIC.
By default, this is through VMware Tools and from your screenshot you don't have it installed on the VM; that's why your DFW rules using object doesn't work.
IP Sets works because NSX know the IP address.
Installing VMware Tools is a best practice not just for NSX.
Newer Linux uses open vm tools and if you need to use open vm tools, you would want to use NSX 6.3.2
VMware NSX for vSphere 6.3.2 Release Notes
Starting in NSX 6.3.2, Open VM Tools is supported with Distributed Firewall.
Prior 6.3.2, Open VM Tools are not supported and may not work in some scenario and the workaround is to use other method for IP Detection such as ARP/DHCP Snooping.
Refer to this document on how to change IP Detection: Change IP Detection Type