I discovered a major issue:
Assuming all is well with your "pinned" files showing up in the sync root folder and also visible in the "hidden" cache, since the sync root folder is in "cloud storage" folder as if it is an offline drive... if you delete a file, instead of being sent to the local trash on your computer (which could be implemented to have the actual file in the cache go to the trash, etc), macOS warns that you will permanently delete the file (i.e. not in the local trash). That is what happens: 1. if you delete from the sync root folder its gone from both the sync root folder AND the cache and not in the trash and you cannot command z it back. In this case you have to go online to one drive and revert it in the one drive trash folder. 2. However if you delete the file from the cache, then it does not warn you, the file goes into the local trash and you can undo it with command z.
So this is not good because one should be able to delete a local actual pinned file and have it stay locally in the trash folder in case you want it back. Pinned files, even though they are in a cloud storage folder, should be seen as technically not and the os should put them into the local trash.
Not sure if this is an apple thing or a Microsoft thing, but either way, it needs to be fixed.
WORKAROUND: Use Pathfinder.. .for some reason if I use Pathfinder instead of Finder, I can delete and undue as normal.