Cannot create "Documents" folder in my Home folder

Sync My Mac turns on iCloud Drive, and whatever you put in your iCloud Drive folder gets synced with iCloud. If you keep something out of the iCloud Drive folder, it isn't synced. You can let specific apps save their data in iCloud as well, so you can turn each of those on or off. Photos, for example, is a completely separate system.

But you can't just grab the Desktop folder and drag it to the iCloud Drive folder-- Desktop and Documents folders have a special use in the OS-- apps expect them to be in a particular place. So if you want those to be synced as well, then you need to turn that on separately-- then you'll see those folders in the iCloud Drive folder rather than the expected User place, and they will behave as the had before. That is, stuff in the Desktop folder that's now in the iCloud Drive folder will appear on your desktop, and you can no longer have a "Desktop" folder in your User's place. The "Documents" folder in iClod Drive will accept files sent by apps to Documents, but you can't have a "Documents" folder in your User's location. But you certainly can choose not to synchronize those folders if that's what you want.

This may help:

Understanding iCloud Drive - Apple Community

You can adjust your settings so that all folders- meaning, downloads, movies, music, pictures, desktop, documents- all within your iCloud Drive will all backup for you. If you're having issues with the specific "documents" folder, I've had to create another file folder before and simply named it, "Docs", or "Files". Select, settings, apple account, iCloud, drive, toggle the option ON for Desktop & Documents Folders and ensure the option just above is also toggled on to sync your iCloud Drive. Hope this helps. Please feel free to email me with any questions.

You also may want to download the most recent update for Tahoe as well, I see you only have 26.2 downloaded.

nat*******d@icloud.com 😁

[Edited by Moderator]