OneDrive Desktop Sync\Backup causes Thumbnail Preview to be enabled

Hello Experts,

After I install OneDrive and enable sync on the Desktop, my text files, html, pdf look like this

Instead of the usual

text file, html, PDF icons. As shown, in the first image, OneDrive somehow makes the icon of the text file change into the text file's content, and I want to disable this behavior.

I've tried enabling "Always show Icons, Never Thumbnails" in the explorer view settings, but this disables previewing on other file types which do have previewing enabled, even without OneDrive, such as pictures or videos.

This was working fine on Win 10, Win 11, without the Desktop backup enabled, as soon as backup is enabled this changes.

Stopping the backup, immediately restores the view. In the folder view of Desktop we can select list view or other view to fix this problem partially. However in Desktop there are only 3 views, all of them has the problem.

I'm sure this preview is hitting performance issues on the device, trying to build thumbnails of large files.

Folders outside the sync doesn't have this issue. They only preview images, videos only as expected default Windows behavior.