Everything including the world is Brahman. The upanishad you quoted also says the same thing. All this is Brahman." Thus there is no contradiction.
According to advaita, the world is also Brahman but is perceived wrongly by the ajnani. The ajnani thinks the world is real apart from Brahman but the substratum is Brahman. Take the example of bracelet, ring and necklace. The jnani sees the gold in each of them but the ajnani thinks each of them are different due to different names and forms. Advaita says the names and forms are not real by itself but dependent on the underlying substratum. The world of names and forms are not real by itself but dependent on Brahman, the underlying substratum.
*ataH pR^itha~N.hnAsti jagatparAtmanaH
pR^ithak.hpratItistu mR^iShA guNAdivat . guNAhivat
a-dhiShThAnamAbhAti tathA bhrameNa .. 235.. Vivekachudamani*
The world has no existence apart from the Supreme Self and the
appearance of its separateness is false like the appearance of a snake
in a rope. Can a superimposition have any existence apart from its own
substratum? Through delusion, it is the substratum itself which
appears like that.
An ajnani perceives the world to be apart from the Brahman and real. But actually the world is Brahman only.
Talk 399, Talks with Ramana Maharshi
Now they say that the world is unreal. Of what degree of unreality is
it? Is it like that of a son of a barren mother or a flower in the
sky, mere words without any reference to facts? Whereas the world is a
fact and not a mere word. The answer is that it is a superimposition
on the one Reality, like the appearance of a snake on a coiled rope
seen in dim light. But here too the wrong identity ceases as soon as
the friend points out that it is a rope.
Whereas in the matter of the
world it persists even after it is known to be unreal. How is that?
Again the appearance of water in a mirage persists even after the
knowledge of the mirage is recognised. So it is with the world. Though
knowing it to be unreal, it continues to manifest. But the water of
the mirage is not sought to satisfy one’s thirst. As soon as one knows
that it is a mirage, one gives it up as useless and does not run after
it for procuring water.