I've verified that this method works, and I've confirmed that it doesn't use up any extra space on my C: drive when I properly link it with my D: drive.
Make sure you're doing this right; Jaco.XiliX's instructions can be a little confusing. As mentioned (but not explicitly instructed) as part of step 1, make sure you *delete the iCloudDrive folder* in your c:\users\<username>\ directory before moving on to step 2. Our goal is to re-create *this* folder as a link/alias.
Once you follow the remaining steps to create the iCloudDrive folder on the larger drive and create the link, you'll see the iCloudDrive folder re-created in c:\users\<username>\, only this time, the folder's cloud icon will have a little arrow on it. This indicates that the folder is only a *link* to the real location. Now take note of the disk space remaining on your C: drive, and start copying files over to either your linked or real iCloudDrive folder (it doesn't matter which one). Once the copy is complete, check your disk space on C: again... it shouldn't have changed.
Good luck!