So ok, 12.3 has came and we have ruined Onedrive, thank you again, Microsoft. Tried to search for alternatives. Tried iDrive. They are offering 1TB for a 2USD or 2TB for almost 4USD right now for those who are switching. Long story short, mac app is working without any problems on 12.3 Monterey. No enforced files on demand crap, nothing. Files are syncing happily and only external disk is used, no internal disk requirement and several copies like in crappy M$ implementation. Looking at this I see how M$ does not care about their users. It was perfectly possible to leave Onedrive client without this crappy new files on demand implementation for those who do not need it. For those who need it there could be an option to switch on this new crippled behaviour and live with this bad implementation. So in my case, if everything will go well, will cancel M$ subscription right after it will finish. I think that such company with such attitude are not worth the money users pay for it.