A Microsoft file hosting and synchronization service.
Hi FraserDon,
I go through the post carefully, I test on my side in OneDrive for Mac on Mac OS Monterey with latest version, and I can repro the same behaviour as you said and get a similar prompt. I am really sorry for the inconvenience this causes, as it seems that you are using Preview version of OneDrive, and would suggest you give feedback on the issue to the related developer team of OneDrive for Mac by select OneDrive icon>Send feedback. Your feedback will promote the related developer team of OneDrive to change the behaviour in OneDrive sync folder. Thanks for your efforts and understanding!
Additionally, though you may not find the deleted file from trash on Mac, you may find it from OneDrive recycle bin and you may restore it from here if you want. Check the link for more information on: Restore deleted files or folders in OneDrive (microsoft.com)
Best Regards,
Clark