After months of having this problem, I can give you some pointers.
It seems that there are two versions of OneDrive Personal. The folders on the PC only work well between accounts with the same version.
Without warning, some accounts change versions, so from one day to the next they can no longer use that folder and it becomes a simple link.
On the OneDrive website, in options you can identify which version of OneDrive that account has. There are many differences, but I am attaching a screenshot to quickly identify if you are on the new or old version.
Microsoft would have to migrate everyone to the same version, and it would have to be a process of a few days, but it has been having this problem for 9 months now.
We want a solution now!!

This is indeed the problem. There are two versions of personal OneDrive. An old one and a new one. Shared folders between old accounts still work as usual. Shared folders between new accounts also work. However, a shared folder from an old account to a new account (and vice versa) does not work. Below are two images to help distinguish between old and new accounts. (Create and Upload = new, New and Upload = Old)
Last weekend, an old account was upgraded to a new account. Since then, shared folders to old accounts no longer work, but they do work with accounts of the new type. So it really is a server/version issue.


these seem to be conflicting. I have the search button under options, suggesting i have the old version per the first poster, but I also have "Create and Upload" which suggests the new version?
On another account, I have "Add New" (suggesting old) and no search button under the options (suggesting new). It seems one of you may have mixed up new and old.
Both are primarily used on different machines, but in both cases the OneDrive app is 25.020.0202.0001 and Windows 11 Pro 24H2 build 26120.3291, so that apparently has no bearing.
Either way, this issue is very annoying.