Apple Dev Docs:
One way to prevent files and directories from being stored in iCloud is to add the .nosync extension to the file or directory name. When iCloud encounters files and directories with that extension in the local container directory, it does not transfer them to the server. You might use this extension on temporary files that you want to store inside a file package, but that you do not want transferred with the rest of that package’s contents. Although items with the .nosync extension are not transferred to the server, they are still bound to their parent directory. When you delete the parent directory in iCloud, or when you evict the parent directory and its contents locally, the entire contents of that directory are deleted, including any .nosync items.
Thing is, the Documents folder was the parent directory in my case, and I neither deleted nor moved it. I was also greeted with the message that "any documents no uploaded to iCloud Drive will be moved to a folder named "iCloud Drive Archive". It did, in fact, create the new archive folder. However, it did not include the nosync folders.
