YES.
After reading this:
https://9to5mac.com/2016/10/27/opinion-sierra-storage-management-system-nightmare/ I thought, wait, I definitely disabled this when installing. So I went on to find the setting. It took me a while to find it – System Preferences>iCloud>iCloud Drive (options). And it was on, both the laptop and desktop. I did NOT enable it myself.
I have no idea how to assess the damage. My MBP had 10 GB more free space for some reason, but my iCloud sub is 50 GB, out of which 40 is taken by photos. As for the desktop I don't remember how much space there was previously vs now. I installed 10.12.1 on the desktop and laptop Saturday. Laptop still has the sleep issue where it switches the screen off and it's impossible to switch back on without reboot. Photos is still analysing a few hundred pics every restart, then stopping. People still don't sync between devices.
Be right back, I'm off to find some aspects of iCloud that DO work as expected. I'll be hitting Time Machine hard in the meantime to restore El Capitan.
Ouch.
In terms of possible data loss in your case, shouldn't the files at the very least be available online or are you saying they are lost forever?
I did a re-install and made sure nothing related to space optimisation was turned on (it wasn't IIRC) before re-installing apps and copying data back. My iCloud->iCloud-drive settings in sys-settings have Desktop and Documents unchecked so it seems they do obey the overall setting for optimisation. I actually couldn't find anything turned on by default.
I think Apple did a bad job of conveying the current settings, considering the risks. The optimisation settings almost feel hidden in the "About this Mac..." option in the Apple-menu. For such an important choice there's no overview telling me explicitly what the current settings are other than somewhat ambiguous "switch on..." buttons. On top of that there's a simple check box for Desktop and Documents in the iCloud/iCloud-drive-settings.
In short, my data is the king and queen the rest of the system should kneel to. My computer and its software exists for the sole purpose of handling my data, whether that is an e-mail I just received, files describing a working theory for cold fusion or a photo of a kitten. The only entity who can reliably determine (relatively speaking) whether a piece of data is important to ME is me, myself and I. It's not about how or when these files have been used, it's what's inside of them. Content. Maybe there is a file I only open once a year but is extremely important? Maybe it's huge in size? Maybe my hd space is lacking? Maybe I absolutely need that file in an offline environment?
Spreadsheet editors are already permuting my data if I don't turn off the "clever" options quickly enough, I don't want my computer to be that kind of clever (I realise it already is in many ways).
Besides possible security risks, "small" data in constant flux such as contacts, e-mail, bookmarks are all great to have synced online. The rest of my data? Online as a backup: yes. Online as the "main" storage? No.
I never upgrade between e.g. 10.11->10.12 versions. It's always a complete re-install and I do manual backups (I do even when I use time machine). I've only upgraded my personal laptop so far, the work Mac is still on 10.11.