On one of my MacBooks, a few iCloud folders have persistent iCloud status icons, even though there is no iCloud pie chart upload/download activity in the side bar. For example, they will show as being only in the cloud (i.e. cloud with down arrow) when they are definitely on my computer. Other folders have up and down arrows in the Finder Window Size column indicating something needs to be synced, but all the files in the folder are actually synced and have no incorrect cloud symbols. A few folders show the simple-line solid cloud icon which is normally only shown when iCloud status is clicked under View Options.
On my other MacBook, everything is fine with no anomalous iCloud folder icons. Both computers are running Monterey 12.6 and have "Optimize Mac Storage" turned off. When I create/edit/delete files/folders, both inside and outside the anomalous folders, everything syncs fine between the computers. I have deleted the .DS_store files, checked for hidden files in the folders, rebooted the computer, run DiskUtility repair, but haven't found a solution.
The only fix is to make a copy of the folder and after the copy syncs to iCloud, delete the original folder, and rename the copy to the original folder name. Unfortunately, this does not fix the problem for the enclosing folder(s), all of which still show the anomalous iCloud icon, so to ultimately fix all the anomalous folders at the top level requires hundreds of GB of syncing.
This problem (and workaround solution) is similar to iCloud Drive Preview folder shows persistent iCloud icon, but is not specific to Preview.
This is mostly just an irritation, but it does confuse me a bit when I am checking if an actual iCloud sync is complete. Is there some reset or cache clearance that could fix the problem when it occurs?
