Except I think it will make extra work or add confusion for people who started out pinning everything from the top level down, intending to tell OneDrive to preserve everything locally, but forget that new files/folders put into it after that won't default to getting pinned.
macOS 12.2 OneDrive 22.012.0116.001 (insider preview):
It is certainly confusing, but files inside a folder marked as "always keep on this device" are being kept on this device. And this applies to both files put into OneDrive locally and files put in remotely and then downloaded. The Finder interface does not always convey this correctly (bug presumably), but the files are on your Mac. More detail:
I asked for my OneDrive folder to be put on a newly created APFS volume, also called OneDrive. Previously all files and folders would be put in this directory. This is no longer true. The OneDrive folder has been replaced with an alias pointing to ~/Library/CloudStorage/OneDrive-Personal. Whether I view that as ~/Library/CloudStorage/OneDrive or as /Volumes/OneDrive/OneDrive, I see this:
where it is all presented as the pseudo-volume OneDrive (with its cloud symbol).
The 4 files in Test folder which were loaded remotely (via the web interface) are all badged with the tick mark, but also with the cloud download badge. Very confusing and probably a bug. But files are not where they seem to be, they are here:
The whole OneDrive structure (with the real files) are in the hidden folder /.ODContainer-OneDrive on the drive where I asked them to be stored. And you can see that all files in Test have been downloaded (without me having to open them).
I am still curious about the Time Machine backup (from the NEW OneDrive location) and restore to a different folder.
Having discovered the stuff above (sorry you need to read it), I can look at my TM backups.
Please ignore the "OneDrive 1" is in an artefact of earlier testing.
You can see the OneDrive alias in the OneDrive volume - this being, an alias, points to the original location in ~Library which is not very useful. But the real files are in the .ODContainer-OneDrive folder. So this is where you will need to go to restore the files.
So, it seems that:
1) All pinned files are successfully downloaded, but not where you might expect without looking under the covers.
2) In some cases the pinned files have an erroneous cloud badge as well as the pinned badge.
3) All pinned files do get backed up by TimeMachine, but not where you would expect them.
4) You can recover pinned files from TM backup using Finder - but it is not obvious.
5) Users of other backup software need to be aware of where files are stored.
Is it easy to restore from TM backup - definitely not!
And it is very confusing/tangled.