You're combining two worlds and then adding up probabilities. But there's no world where all three possible values are in play at the same time. There's only two, and you either picked high or low. It's a 50/50 shot.
Which three worlds? After you have picked one envelope, there are two possible relative outcomes - 2 and 0.5. The average is 1.25 - there is nothing wrong with the math, the only problem is that taking an average of two relative quantities is intuitively not useful for decision making. Putting the intuition on a formal grounding is not something you succeeded with.