Music app not accessing local files (playing from Cloud only)

I have a very large music library (123 GB) on my MacBook (M2 Pro Ventura 13.3.1) which I access on my computer via the Apple Music app and on my iPhone using iTunes Match. The problem is that even the local library on my MacBook (when using Apple Music app) is accessing the matched cloud versions of all my songs instead of the local files. This means that it always needs an internet connection to play music. When you click on info for a song and look under File it says the location is Cloud.

This is obviously due to my iTunes Match subscription, but that is only supposed to be so that you can access your music when you're away from the main repository. How do I get Apple Music on my MacBook to reconnect to all the local files WITHOUT making duplicates? (I tried re-adding an album by selecting the local folder and it just duplicated all the files).

When I go to Music settings and look at the library location it says it's under ..../Music/iTunes/iTunes Music and that's where all the music files ARE but it's not connecting to them. Also, shouldn't there be an .itl file for my library? I looked at the .itl files in the iTunes folder and there are only old ones there. I just added new music recently so I was expecting to find an .itl file with a more recent modified date. Something is not adding up.