DALI optical isolation of signal, but no power isolation?
Where you saw that it directly powers the lines?

The only parts connected to +5V and GND on this circuit are both after the optoisolators, on the "safe, isolated side" of the circuit, so it is isolated.

But bear in mind that this circuit was not designed to withstand mains AC, you can find more rugged solutions if you search for it, for example:
Need help understanding DALI circuit and 220 VAC protection