OneDrive has been such a horrible mess on Mac / macOS for the better part of its existence.
A flaky, unreliable, inefficient pile of garbage. Until 6 months ago (or so).
And then, just like that, Microsoft got their sh*t together. The OneDrive client no longer has to resync *all* files after reboot. Almost on par with the Windows version — which was always very good in my opinion. I was happy, I was appeased. I drank wine to celebrate. And then came macOS 12.2. Microsoft decided to remove the ability to turn off / disable Files On-Demand. Great, OneDrive is now useless on macOS again.
At the time of writing, it's not clear if this is just a pragmatic/strategic decision by Microsoft — "Hey, most users don't need their files stored locally. Just make Files On-Demand the default mandatory way of doing things" — or if it's connected to Apple's doubling down on removing support for Kernel Extensions. Anyway, this is very frustrating for macOS power users. I hope Microsoft (and/or Apple?) can figure this out.
And no, right-click "Always Keep on This Device" doesn't work. It's totally broken.