Similar to others I experienced a lot of confusion - as I was migrating from an OSX11 to an OSX 12 computer I didn't have any warning about the change. In the end it seems to be working although all my files and folders show the cloud icon so there is no way to know which files are actually stored locally and which are not - which is a horrendous user experience as noted before, especially for those on slow or costly internet connections.
One serious issue I've not seen mentioned is I lost all my finder metadata like color labels and tags. Luckily I only use this in one sub-tree, but I know others that rely on this heavily who would be much more affected. Is this by design? The files before migration were tagged, but now they not neither in the FoD Location or in the CloudStorage folder.