Autosave, spotlight and quick look all work for me now that I have fully "downloaded" all the keep on device files. I say "downloaded" because if you already had all your files locally (ie. on-demand off) previously to the update, my files did NOT dissapear but actually were/are in the "hidden folder". You can prove this to yourself by going offline and then opening a file with a cloud on it and watch it "download" into place and the cloud icon disappear. Once that happens, then quicklook worked and I guess so does autosave since I just tried it out and it works. spotlight also works for me.
I am not saying this wasn't a huge pain in the butt, but as of now with the steps that I took, I am fully back in business and none of my files were actually removed from my computer. It just looked like they were--which is certainly distressing. What saved me from major craziness was that I use Cocoatech Pathfinder instead of Finder and for some reason after the update, Pathfinder just pointed to all the files in their new hidden folder home... I noticed the wacky location right away, and then and then started digging into this blog and the announcement. Since I never worried that my files were actually gone, I was able to not freak out and then mark all my top folders (the ones I had kept on my computer in the first place with on-demand OFF previously) and then go through the not fast and not-so-automatic syncing (which looks like downloading but isn't since the files were just moved to the "hidden" cache location) that was required in order to have all my local files look and act local as far as autosave, quicklook and spotlight are concerned. Delete still doesn't; work right in finder. But it does work correctly when I use Pathfinder for some reason.
I posted my entire experience above on Jan 27 2022 11:29 PM if anyone wants to check that out.