I did some experiments and it turns out the fault is not with the OneDrive PC Sync client, the fault is with some of the Microsoft accounts themselves. Some accounts work as usual, but others produce all kinds of weird behavior, not just the Shared-Folder-Becomes-a-Link problem, Eg. in the web interface for affected OneDrive accounts:
- File/Folder share dialog looks totally different than in other accounts
- Navigation pane looks different and the look changes over time (e.g. the "Home" button disappears)
- Behavior of the "Shared" folder changes, showing different available actions over time. Eg. the option to show a shared folder under "My Files" disappeared for a while, and then reappeared.
- The blue button in the upper left says "Add new" instead of "New & Upload" or "Create or upload" as in the other accounts
- The "Plan and Upgrade" menu showed a different (ie wrong) type of account subscription than the others, eg. it showed a "Free" account but with 1TB of storage. It should have shown a Family account in our case.
The effect is that whenever this "weird" account is involved in sharing - either as the sharer or the sharee - the result is a link instead of a folder on the PC.
It looks like something is screwing up the configuration and/or software version of a subset of the accounts running on Microsoft's cloud. Somebody should check which accounts are affected by this misconfiguration, then issue an information email to the affected account holders, and then fix the misconfiguration.
If I could figure this out in a few minutes, Microsoft should certainly be able to figure this out after _months_ of screwing everybody's pooch. This is costing everybody so much time, it's maddening.