I got an answer from Microsoft. They recommend a link to solve the issue. The link has ABSOLUTELY no instructions on how to solve it. Just says that they're aware of the problem and soon (there are complaints from Jun 2024 that are still with no resolution) it will be sorted out.
Here's the answer:
"Thank you for contacting OneDrive support. Hope you are doing well!
We have read your response. Rest assured you will get best assistance.
Before sharing any troubleshooting steps with you, we would like to isolate the issue. We would request you to share the below mentioned information.
1. Please confirm, Is the issue specifically with shared folders or all folders?
2. Are the shared folders showing as .URL in File explorer/finder section? If yes,
We understand that Shared Folders showing up as Internet Shortcuts instead of actual folders in the OneDrive sync client. When try to open the folder, it opens to the webpage.
We regret to hear about the inconvenience you’ve been experiencing with OneDrive. We understand how important it is for you to have a seamless experience, and we apologize for any disruption this may have caused to your work.
We would like to share that our engineering team is aware of this problem and working on a fix. Unfortunately, at this time, we do not have a specific date for when the fix will be released. Our team is working diligently to address this issue.
In the meantime, we request you to access the shared folders and access the shared files on the web browser as a workaround.
Please check the workaround on this link:OneDrive shared folders shortcuts showing up as Internet Shortcuts - Microsoft Support
Should you run into other issues or have suggestions, send feedback the exact same way and we will be able to help you out.
Waiting for your response.
Thank you,
Chandra S.
OneDrive Team
Working hours: 11:30 PM to 9:00 0M PST"