iCloud gone wrong - Local desktop file can't be deleted, some folders/files invisible in Finder...and more!

I must have done something very wrong, but I don't know what. (This is on a new iMac M3 running Sonoma 14.2.1)

Brief story: a few weeks ago I decided to finally buy some iCloud storage and sync my photos, etc. Shortly after that I decided to do the Desktop and Documents as well.

Here's the situation I find myself in now:

Problem 1: There is still a local Documents Folder in my home folder (should it even be there?) with very different files than the iCloud folder, and infuriatingly none of them can be deleted, compressed, or anything else, I get an error -43 if I try. Many of them are also doubled, for instance there is a Finances folder and also a Finances 2 folder. Neither one can be operated on without generating an error -43. I get the feeling there was an incomplete sync or something?

Here's a screen shot after trying to send "Finances" to the trash.

I tried repairing the disk...twice! No difference. What can I do?

Problem 2: The Documents folder in iCloud seems OK, and I THINK it has all my latest files. But at least a few files/folders are invisible in the Finder on my Mac!?! iCloud.com shows them just fine, and looking at the flags for those items in Terminal shows nothing amiss. But they are invisible in the Finder folder. Command-Shift-. makes them appear in gray, just like "normal" invisible files, but I don't understand why they are invisible in the first place. How can I fix this? Running chflags in the Terminal didn't change anything.

There's a basic question about all this I still don't understand: If I use the "Documents and Desktop" option in iCloud, should there still be a Documents and Desktop folder in my Home folder? Shouldn't the iCloud folders replace the "official" ones (the ones with the special icons)? I can't imagine that there should still be a non-synced, local, "official" Documents folder in my home folder, but that seems to be the case.

Sorry for the novel, but I've been struggling with this all day and I wanted to get most of the details down. Really looking forward to some insight, and hopefully some solutions.