So I just set up my wife's new MacBook Air yesterday and ran into this problem. I don't have a solution, but hopefully what I'm about to share might help us figure out what the cause/solution might be for some of us...
First of all, prior to setting up the new MBA I confirmed that my wife's old MBA had her Photos app set as follows:
- Preferences... / iCloud / iCloud Photos / Optimize Mac Storage
When I set up the new MBA and logged into her iCloud account during the initial setup wizard, I wanted to set it up new and not restore from an iCloud backup. Unless I overlooked it (?), Apple's setup wizard doesn't ask you if you want to use "Optimize Mac Storage" for Photos or anything else, for that matter. I suspect that this is a big part of the problem for some of us.
After running into the problem mentioned in the OP, I went into the Photos app's Preferences on the new MBA and saw that it was configured to "Download Originals to this Mac" instead of "Optimize Mac Storage." Ugh. I purposely switched her over to the latter on her old MBA because she only had 256 GB of storage and I wanted to go with 256 GB on the new MBA as well (FWIW, we rarely take our laptops out of our house and I upgraded our family iCloud storage to the 2 TB plan). So I switched that setting, but the Photos app seemed unfazed and was still attempting to sync up her photos, look for duplicates, etc.
I tried a couple of the recommendations mentioned here:
Fix Photos App Stuck at Curating Best Photos on Catalina, Photos stuck on Restoring Screen after Catalina Update,iPhoto not Working, Photos Stuck on Downloading from iCloud,Photos Does Not sync from iCloud on Catalina,Photos App Stuck on macOS Catalina
android-pc-ios-data-recovery.com
I didn't have much success, but eventually tried one of the recommendations which was to sign out of her iCloud account, reboot, and sign into iCloud again. Now, instead of seeing the animated activity at the bottom of the Photos app window (which mentioned "Curating" and "Detecting duplicates", etc.), I was now seeing a simple one-liner of text stating "Updating 6,271 items" with a clickable "Pause" link/button. The number of items was *SLOWLY* decreasing. So it looks like it's still doing something and Activity Monitor is showing a good portion of the CPU usage doing something Photos-related.
What's more, clicking on the Apple icon in the upper left, then "About This Mac" and then clicking on the "Storage" tab, I was seeing a very large chunk (I think over 50 GB) allocated to "Other" and I suspect that a lot of it was actually Photos-related. It was basically telling me that I had about 172 GB free (of 250.69 GB). After typing up much of this post, I went back in to look at that and it's now showing 26.96 GB allocated to Photos and 19.38 GB allocated to Other.
One of the thoughts I had as I started to write this reply was whether I should log out of iCloud again, delete the Photos.Library.photoslibrary file (currently showing a size of 50.52 GB and growing), and then try logging into iCloud again, but I'm worried that might delete photos in iCloud and/or otherwise screw things up in some way.
So, I'm annoyed that this brand-new MBA is using up more storage on photos than it should be (with "Optimize Mac Storage" enabled) and I'm annoyed that it's likely transmitting a large amount of data over Wi-Fi, through the internet, and to iCloud, largely unnecessarily. When I started writing this post, the Photos app's status was showing "Updating 6,261 items" and is now showing 6,085 items. So, again, I'd like to kill this darn processing, clear out the local Photos library (without deleting anything in iCloud), and get it going again with it hopefully being smart enough to know that it should just be caching a small amount of photos locally.
Just to further clarify...my wife's old MBA's Storage info is showing under 11 GB of Storage used for Photos and this new MBA was set up new (so no photos were present on the hard drive at the start) but is showing ~27 GB of Storage used for Photos.
At this point, I've clicked the "Pause" button and will do some more Googling and check back in on this thread later, in case anyone has any ideas.