2021 iMac, M1, running Sonoma 14.5: Out of disk space but shouldn't be, Mac won't store in iCloud

Have approx 185 GB in iCloud storage available, and have tried Optimizing iCloud storage (multiple times) but *it keeps reverting to storing everything on the Mac*. I've moved just about everything over to an external drive and trash, but the *size of the Documents folder (145.4 GB) doesn't ever reduce*. I have checked for large files, but there are just 4 "large files" total size of 35 GB.

I've tried restarting after moving and trashing files, without success.

I'm trying to use iMovie but can't add any more video clips because I get the message that says disk space is almost full. It's not because of any iMovie Libraries, because all but 2 small ones (30 GB) are on the external drive.

Here's a couple photos. I've also stopped Google Drive from syncing, all that did was to increase the available space in iCloud from 175GB to 185GB! And the Documents file remains the same size.

How can I: 1) reduce the size of that Documents folder 2) Stop the process that reverts automatically to storing everything on my Mac? I don't want that, I want as much as possible in iCloud. Thanks!