What is "iCloud Drive (Archive) - 1"? & Why "ghost" Desktop and Document folders?

My regular Sonoma OS system Desktop and Document folders have disappeared in the process of following instructions to make space in iCloud. Under Settings > iCloud Drive > Ticking Sync this Mac, had a confusing message saying the files will be deleted from the mac, and ticking Desktop and Documents several times since it was freezing the computer, ended up creating several iCloud Drive (Archives) as you can see in this picture:

Since reverting didn’t restore the original icons for my Documents and Desktop folders, I found the situation even more confusing. At the same time, I was receiving iCloud messages prompting me to upgrade to 2 TB storage or risk losing access to my emails—which are essential for my work.

After 25 years of using Macs, suddenly losing access to these folders was very concerning. I contacted Apple Support, and they advised me to upgrade to macOS Tahoe 26. After upgrading, the folders reappeared in my sidebar. They are empty now, but at least I can keep them that way while I monitor how iCloud behaves in different modes. This way, I can decide whether or not to keep certain files in iCloud and avoid upgrading my plan unnecessarily, since files I never intended to store in iCloud were taking up space.

Overall, I’ve already spent far too much time repairing the damage, but I hope I’ll eventually understand why these “iCloud Drive (Archive)” folders were created, splitting my data into two large chunks that I now need to sort out. I had to update my system to get these to folders back on my side bar (my question is why they are not showing on my main user folder shown above):