Same problem here, with brand new M1 MacBook Pro. And even more ...
First everything went smooth for 3 days. I already configured iCloud completely as I wished. Then during working a distracting windows like message popup came up, something like "do you really not want to sync documents and desktop?" Wow, because you know I configured it on purpose to not sync, but ask me again. As I do not use both of places, I declined. And that crashed iCloud Sync at all. Not only desktop and documents were not synced, as before and wanted, the whole connection was disabled by this stu popup. All files were moved to archive. And ever since iCloud Drive could not be revived. Not with all I know from years, not with all the tricks in this thread.
Then I used Apple Support. They were helpless, so then senior support. Wow, what a waste of time. Did not help that I already tried everything. I needed to do everything(!) again during the few hours call. What a waste. Of course same result. Then the brilliant "solution" wipe you whole system clean and set it up fresh. Well because that is not wasting more time...
But wait, it gets better. This was not even possible. After reformating harddisk and reinstalling BigSur v11.1, no user could be created in the standard procedure. After three attempts and a force restart, all three are there but not even possible to login or retrieve via Apple-ID. They are corrupted, because the setup cannot finish. Completely reproducible all the times you want. So WOW, not even the backup system works. And also not with a downloaded system from another Mac on USB Stick. (You can find the stories from others too about this behavior. With 11.1 that is btw.)
Bottom line: Apple Support gave up. M1 is messed up and not more than a disappointing prototype. Christmas was ruined. And the MacBook is on its postal way back for a refund.
Perhaps an M2 then ... someday ... or not.