Several months ago, when we were on Ventura and I first saw this "Photos Library on the iCloud drive" come up, I tried moving one of my Libraries to iCloud, and it seemed to work. But as, léonie pointed out, it was secretly hiding on my internal drive-- it only pretended to be working from the iCloud drive. I think that Keith and léonie may not be the ones confused.
In fact, my trial showed that it wasn't even working as a static cloud backup, because when I thought that I'd moved it to the iCloud drive, it wasn't really there, at all. I could get a copy of the package "TestLibrary.photoslibary" to iCloud drive only if I removed or replaced the ".photoslibrary" suffix, and then the library showed up as a folder. I could then copy the folder back, change the suffix back, and it would work with Photos. iCloud Drive really doesn't want the Photos library! I didn't try this, though, with a Library that was also syncing with iCloud Photos.