Need clarity - SPO Retain documents BUT allow other library deletion.

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I am working towards finding a sweet spot around their Data governance needs. In a nut shell their needs and scenario is

“many documents are created in sharepoint online sites and as a policy you would like to preserve those documents for 7 years. During the lifecycle of the document, the end user must NOT be able to delete the document, for now this is achieved by defining the preservation hold. BUT currently deleting the site, site collection, the library etc is also being prevented,  So you want to a policy that preserves the item for 7 years, let end user NOT delete it, but other activities on the site or site collection should not be impacted.

 

Currently they were using Retention policy – preservation policy to mass apply retention. BUT as a side affect no one can delete the list and library as the site, which makes sharepoint site management difficult.

 

My research has shown – that Microsoft  is moving in direction of Labels and retention policy discouraged in long run, where we define query (I am using filetype:docx filetype:pptx etc) and auto-apply across all the site. NOW I’m hoping that any document matching the query will be auto protected, BUT the LISTS would still be deletable, lists & libraries that has protected content may be rightfully disallow deletion but others should be deletable. What about the Site collection itself. Etc.

 

So basically i want to know:-

1- if the label is way to go ?

2 - If my theory is right?

3- SPO library that does not have label protected doc will be deletable ?

4- SPO library that does have label protected doc will be deletable ?

5- Any other suggestion/advice

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