Huge files, iCloud Drive and Finder

Several moons (and at least a couple OS versions) ago I created a Windows 10 virtual machine using Fusion, which stored new VMs in Documents by default. Fast forward through High Sierra and Mojave upgrades which at some point put my Documents (including that VM) into iCloud Drive. I didn't know that's where the VM file was stored when I agreed to have my Documents hosted on iCloud Drive; I don't use Documents for my regular file storage.

The VM file is 85GB. After consulting with VMWare, I confirmed that Fusion can't work with it from within iCloud, so I tried to copy it from Documents on my iCloud Drive to a non-iCloud folder on my local hard drive using Finder. I ended up with a 181-byte generic local file, and a progress circle next to iCloud Drive in the sidebar. I think it might be trying to download it in the background but the progress indicator in the sidebar appears stuck. Watching the actual process bar shows it never moves beyond zero in its download.

I'm on my third attempt to download the file from iCloud.com using Safari. The first two ended with 9GB .zip files that won't uncompress properly.

In the meantime, I'm left with questions about how iCloud Drive works and what I can do in this situation...

1) If something appears as an iCloud file in Finder, where does that file really live? Is it local? Is it in iCloud and what I see in Finder is an alias or another shortcut to a remote copy?

2) If the files are now cloud-based exclusively, would that mean that my system actually uploaded the whole 85GB file in the first place over time?

3) Is there a limit on what I can download from iCloud using the Finder (i.e., file types, size, etc.)?

4) How does iCloud Drive handle downloading large files using Safari? Is it making a much smaller .zip file to download and the issue might be a problem with that compressed file?

Thanks in advance!