Here are some troubleshooting steps for the issue of being unable to open Excel files from SharePoint in Excel desktop:
Office Repair: Go to 'Programs and Features' on your PC, select Microsoft Office, and click 'Change'. Choose 'Online Repair'. This fixes most of the Office-related issues.
Office Updates: Ensure Excel and other Office applications are updated to the latest version. Updates might contain patches for software conflicts caused by the MS365 update.
Clear Cache: Clear the Office cache. This can be found in C:\Users[username]\AppData\Local\Microsoft\Office[version number]\OfficeFileCache. Backup, then delete the content of the folder.
Check Permissions: Ensure that users have appropriate permissions on SharePoint. Sometimes, users can view in a browser but not in the desktop due to different permission levels.
File Associations: Ensure .xlsx files are associated with Excel desktop. You can check this in the default apps or programs setting of your operating system.
Disable Add-ins: Start Excel in Safe Mode (by holding 'Ctrl' while starting Excel) to see if any add-ins are causing the issue. If it works in Safe Mode, disable add-ins one by one to identify the culprit.