I have been having this same issue with the new onedrive client and having the FilesOnDemandEnabled=1 registry value. I backup the onedrive configs via UEM and it pops up a scary looking message about it not being the original folder. Clicking 'try again' will get it working.
We have seen issues with backing up too many files & configs via UEM in the past, so I tried figuring out what was the minimum needed for OneDrive. This is what I am backing up:
[IncludeFiles]
<LocalAppData>\Microsoft\OneDrive\settings\Business1\*-*.ini
[IncludeIndividualRegistryValues]
HKCU\Software\Microsoft\OneDrive\Accounts\Business1\Business
HKCU\Software\Microsoft\OneDrive\Accounts\Business1\FirstRun
HKCU\Software\Microsoft\OneDrive\Accounts\Business1\UserFolder
HKCU\Software\Microsoft\OneDrive\Accounts\Business1\DisplayName
The ini file and the 'Business' and 'FirstRun' registry values are the bare minimum. The 'userfolder' is needed so that launching the onedrive app from the start menu will jump to the correct location. The 'displayname' will append your unique name to the end of the onedrive - XXX folder on the leftnav of explorer.
John - how are you installing the onedrive client each time?