I went into icloud.com, and deleted ALL photos. Then I 'uploaded' 2 photos via the 'Uploads' folder on my PC which then appeared. See attached for what it shows now. 2 photos total occupying 3.8GB.
What is going on?
(I do want to mention, I disabled "iCloud Photo Library" in Photo settings on my iPhone. This is the feature where it takes your entire existing library on the phone and pushes it to iCloud - it says I don't have space for this. I have 359 picts/vids on the phone itself in Camera Roll)