In Massechet Mezuzah 1:3, we read:
שנה אותיותיה או שנכתבה עברית הרי זו פסולה.
If you changed [a mezuzah]'s letters or it was written in k'tav ivri, it is pasul. [my transl.]
The same can be found in Massechet Tefillin 1:2.
Your source in the OP brings Mishnah Yadayim 4:5, in which we read:
תַּרְגּוּם שֶׁכְּתָבוֹ עִבְרִית וְעִבְרִית שֶׁכְּתָבוֹ תַּרְגּוּם, וּכְתָב עִבְרִי, אֵינוֹ מְטַמֵּא אֶת הַיָּדַיִם. לְעוֹלָם אֵינוֹ מְטַמֵּא, עַד שֶׁיִּכְתְּבֶנּוּ אַשּׁוּרִית, עַל הָעוֹר, וּבִדְיוֹ.
If an Aramaic section was written in Hebrew, or a Hebrew section was written in Aramaic, or [Hebrew which was written with] k'tav ivri, it does not defile the hands. It never defiles the hands until it is written in the Assyrian script, on parchment, and in ink. [transl. lightly edited from Sefaria]
"Defilement of the hands" was decreed on scrolls so as to save them from being destroyed by mice that were also eating terumah (Shabbat 14a) or so that they wouldn't be used as carpets for animals (Tosefta Yadayim 2:9).
Rambam rules in Mishne Torah Shabbat 23:26 that only writings in k'tav ashuri may be saved from a fire on Shabbat:
... וְהוּא שֶׁיִּהְיוּ כְּתוּבִין אַשּׁוּרִית ...
... And that is when they were written in Assyrian script ... [transl. from Sefaria]
To put these sources together: scrolls written in k'tav ivri are disqualified from use, and even not considered to have kedusha, since we don't worry about them being destroyed or used in an inappropriate manner.
(I got most of these sources from Rav Menachem Kasher's Torah Shleyma vol. 29. See there for many more details and some possible nuance according to some [potentially rejected] opinions.)
