To be fair, I'm not sure if it's an interop/open source thing, and it's just the fact that windows was always based on the fact it can be disconnected and run on a local account, even though microsoft tries to hide it.
Also one thing I have discovered with the whole work from home thing, is that users connected to their personnal cloud account on windows at home who then also connect their professionnal o365 account for work randomly end up with various weird issues.
Their cloud account in the OS thing is just not well thought out.
Alternatively, it is very well thought out, but has different goals than you imagined. It is certainly a terrible user experience in many ways.