iCloud has hijacked all of my OneDrive documents, made them unopenable
I have a shared online OneDrive that I use for work on my personal Mac, which also uses iCloud. I woke up today to one of my online OneDrive files for work being turned into an unopenable file with the added ".icloud" extension at the end of the name.
I tried researching and troubleshooting, and ended up unchecking "optimize mac storage" in the apple ID system preferences, but that only turned every single one of the files in my online OneDrive into the unopenable .icloud extensions. I can see the files on the OneDrive folder on my desktop, but I can't open/download them because "there isn't enough space on my computer".
I have a feeling this has something to do with my recently letting OneDrive put a file for itself on my Desktop, and now iCloud has hijacked it. I'm absolutely terrified of losing these files - if I do, two years worth of research and hundreds of thousands of dollars are down the drain. Happy to provide screenshots etc upon request. Please help.
MacBook Air 13″, macOS 10.15