Everything works flawlessly. There's no reason why it shouldn't. And there is no project icon in the projects browser once the folder has been archived - iMovie no longer displays it, unless and until the folder is restored. Only active projects are shown.
The OP's specific issue, shared by many, many other users of iMovie, is that performance suffers when the library gets bloated. And it eats huge amounts of disk space.
I didn't quite grasp how your comment...........
"Create a new library and start using that one. You can create as many libraries as you want. I have several of them. Every year I create a new one and name them by year."
......actually helps his/her issue, though if explained step by step it might aid the OP.
The 3rd option here might help:
Work with multiple libraries in iMovie on Mac – Apple Support (UK)
This might achieve the same result of transferring the bloat to an external HD in order to help iMovie become less sluggish.