Trying Desktop & Documents Folder feature on my Mac and am confused about a couple of points

Maybe a more experienced person can help me. Since I turned on iCloud Photos and it seems to be going ok, and since I upgraded to a 2 TB iCloud plan, I decided to turn on the "Desktop & Documents Folders" feature. I am not enabling "Optimize Mac Storage" because I want to continue doing extra full backups with Time Machine, Carbon Copy Cloner, and Backblaze. I have a 512 GB internal SSD on my MBP.

Here are the points I'm confused about:

(1) The main Desktop and Documents folders get moved under iCloud Drive. What happens to references to the previous location in the hierarchy? Don't certain apps remember where the files were and depend on them to be there? Or is that reference automatically updated? Does this affect Time Machine and other external backups.

(2) On my iPhone, in Files, in iCloud Drive I see the new "Documents - MacBook Pro" directory under "Documents". But I just see one "Desktop". Why isn't it called "Desktop - MacBook Pro"?

(3) I haven't tried turning it off or signing out if iCloud, but I read cautions about what happens. Like you will be prompted if you want to leave a local copy or not. And if you do, they are moved to a different folder labeled "Archive" and there is a new Desktop folder created and you can move stuff back there if you want, etc. With all that moving and renaming going on there is no confusion about the location of items? If you don't choose to leave a local copy are all the files removed from your Mac and just left on iCloud?

Thanks,

doug