2.24.22 UPDATE: We've been listening to your feedback, and we've made some design changes. We're releasing a new version that addresses the most common themes and makes it easier to achieve the previ...
Updated Feb 24, 2022
Version 12.0
Blog Post
Regarding no longer being able to move files and folders from OneDrive to the Trash. It's likely Apple's fault with the new File Provider model that OneDrive uses. Although I could see Microsoft wanting to force people into using the Recycle Bin in the web version of OneDrive. So maybe they chose to implement it that way. iCloud certainly allows trashing files.
Try this: delete a file you don't need and accept the Finder prompt so the file is deleted immediately. Then navigate to your OneDrive on the web. You'll find the file sitting there in the Recycle Bin. And you can restore it from there. For most of us, this is not the desired behaviour.
Workaround: Create a "To Trash" folder on your Desktop (which is not in OneDrive). Drag any files and folders to be deleted to "To Trash". Trash the files in "To Trash" as needed.
Automated workaround: I have done this and it works. Create two macros in Keyboard Maestro. (There may be ways to do this with other tools like Hazel). One macro watches the "To Trash" folder on your Desktop. Any time files are moved there they are automatically moved to the real Trash. The other macro only runs if the Finder is in the foreground. It responds to the Command-Delete keystroke. If the selection path is on a network drive the macro issues the Finder's Move to Trash dialog. Otherwise it issues an AppleScript to move the selected files to the "To Trash" folder.
Please note: you might think you can do this with just the one macro and move the file direct to the Trash. But what will then happen is the file gets permanently deleted without warning. Presumably it's up in the OneDrive Recycle Bin--I didn't check.
One last thing. This solution, i.e. using a To Trash intermediate folder, loses the capability to "Put Back" whatever you've trashed, if that matters to you. The item(s) would just be put back into "To Trash". Instead you will have to manually find where the item(s) belong. Note that OneDrive's Recycle Bin does have "Put Back" capability in the form of the Restore command, though the file will not be automatically re-downloaded even if you have selected Always Keep on This Device.