I'm not sure I get what's happening. iCloud Drive is a folder on your Mac. If you see Desktop there, then you are seeing the Desktop folder on your Mac. Including Desktop in syncing with iCloud just puts the Desktop folder in the iCloud Drive folder instead of in your User folder. Otherwise, it's the same.
Things in your iCloud Drive are copied to iCloud.com where you can see them and use them from the browser. If you have other devices connected to iCloud, then the contents of iCloud Drive can be seen and used on those other machines, as well. But, the Desktop folder is local to you. This applies to anything you put in the iCloud Drive folder.
If you have "Optimize Mac Storage" turned on, then when your Mac's hard drive gets really full, some lesser used files will be removed to make room. When you need one of those removed files, the Mac will grab the copy at iCloud.com and copy it to your Mac where it will again become a local file. You always use local files. This should all happen transparently.
Are you using "Optimize?" What percentage of your internal hard drive is free?
Perhaps the biggest downside of "Optimize" is that backups may not include all your files. I don't do "Optimize" on my Mac, though I use it on my iPhone which has way less storage. To keep the room I need on my MacBook, I put stuff on a tiny (like 1 ounce) SSD that I carry around. I try to keep 20% of my internal drive free.
So, I don't see what you mean by "iCloud suddenly re-uploads the whole desktop…and I can’t do anything for 4 – 5 full days…." The files you use aren't "uploading;" they're right there on the Mac.
Can you clarify what you mean?
