It needs to read the repo under .git; that’s a lot of files that may not be synced, depending on local disk space, frequency of use, etc. The local disk is just a cache.

There may be an option to Always keep on this device, which might help.

You're pretty lucky, then. This kind of file sync is a cursed problem in general (in that a truly robust solution is just not possible), but onedrive seems to be particularly bad in terms of reverting local changes, not syncing changes, and generally messing things up, especially when there's a lot of files, and even when there's only one user of the data. (it also makes anything involving writing lots of temporary files even slower, like most software builds).