Yesterday's lengthy update from Microsoft's OneDrive architect Jack Nichols in the link above is really a must read.
I have been a heavy OneDrive user for years, using it for syncing lots of files, including hundreds of thousands of pictures, between multiple devices. The macOS OneDrive client is key in my cloud file storage workflow, so I was also in fury when I initially discovered the update and found that all my files seemed to be gone, forcing me to use theFiles On-demand feature that I had always kept disabled due to considerable performance issues with the previous OneDrive version.
Even with that feature disabled, the OneDrive experience on macOS has always been mixed, due to the issues that Jack is mentioning: performance issues, inconsistent icons... it was clearly not the experience that you expect from Microsoft.
After having read Jack's explanation, and being in the software development industry, I welcome the new approach that Microsoft is taking, and the time they invest in the macOS OneDrive client. Relying on a native macOS feature (the macOS File Provider platform) is clearly the way to go.
There are, however, issues remaining. In my case, even after having checked Always keep on the device on a folder and waited for hours, the files are still not immediately displayed in its sub-folders, until I open those folders and wait for the 2 seconds delay to have them appear. They also do not appear in Spotlight searches until I do so.
They should have warned us all ahead of this update. There is nothing worse than booting your Mac in the morning and discover that all your files are gone, or at least seem to be, but let's all reconsider the question with that status update and describe the remaining bugs to Microsoft.