Windows 10 Version 2004’ Issues with OneDrive 'Files On-Demand

[German]Microsoft has just confirmed a new problem with Windows 10 version 2004. After an upgrade, older devices and applications may experience problems with the OneDrive 'Files On-Demand' feature.

OneDrive feature "Files On-Demand"

OneDrive's Files On-Demand feature allows users to view all files stored on OneDrive locally in Explorer without having to download them and occupy space on Windows. With Files On-Demand enabled, Windows 10 displays all OneDrive files in File Explorer. It also shows the information needed for each file. Only when a file is opened does the OneDrive client download its contents to the local Windows 10 computer. Microsoft has described this feature in more detail in this article.

Upgrade to Windows 10 version 2004 causes trouble

Unfortunately, upgrading an existing Windows 10 system to the Windows 10 May 2020 Update (version 2004) can cause problems in the OneDrive "Files On-Demand" area. On reddit.com you can find this post from the beginning of June 2020 which reports about problems.

Windows 10 version 2004 completely broke OneDrive

OneDrive stopped working as soon as I updated to Windows 10 2004. Initially I got the error "OneDrive cannot connect to Windows", which gave me the options "Try again" or "Download all".

I tried the steps at https://support.microsoft.com/en-us/office/-onedrive-cannot-connect-to-windows-error-when-accessing-files-in-onedrive-7c5b675f-555e-4aa1-b4d8-554698c2c2b9 without success. A restart did not fix it either.

Even worse, after choosing "Download all", the sync made no progress after downloading just a few MB.

Following the advice on the OneDrive website, I tried the "Reset OneDrive" thing and now it's been stuck for a day on "OneDrive is updating files – Processing 12,979 changes", often using 30% CPU time but never actually downloading anything. Now I can't even open the files which I already had on my PC.

If I use Process Monitor to monitor what OneDrive is doing, I can see that it's repeatedly accessing the same files on a loop. For example, if I set Process Monitor to only show accesses of one specific file, I can see that it's accessing that file every three minutes.

This reddit.com post addresses the same problem that "Files On-Demand" is simply broken in Windows 10 version 2004. 

Microsoft confirms the problem

At the end of June 2020, Microsoft released this support article for Office users, which confirms the problems that occur when you upgrade to Windows 10 May 2020 Update Version 2004 or when you activate Files on Demand in OneDrive. On July 2, 2020 a support article Issues using OneDrive Files On-Demand on some devices after updating to Windows 10, version 2004 for Windows 10 version 2004 in conjunction with OneDrive and OneDrive for Business was published.

After you upgrade to Windows 10 version 2004, some older devices, or devices with certain older installed applications that use older file system filter drivers, might not be able to connect to OneDrive through the OneDrive application. This removes the ability to use Files On-Demand to download new files on demand or to open previously synced/downloaded files.

Affected devices may receive the error message "OneDrive cannot connect to Windows". In English the error message is: "OneDrive cannot connect to Windows. Files On-Demand requires a connection to Windows in order to show your files without taking up space on this device. OneDrive can keep trying to connect to Windows or you can choose to download all your files. You won't be able to use online only files until this is fixed".

(Source: Microsoft)

Microsoft has published the above screenshot with the error dialog box.

Microsoft's Workaround

In this support article, Microsoft states that a fix for this issue has been released for affected Windows 10 version 2004 systems. The troubleshooter should be able to restore access to OneDrive and files on-demand. Depending on your user settings, the troubleshooter might run automatically to resolve the problem. If users are prompted to run the Troubleshooter with Troubleshooting, it is recommended that they allow the troubleshooter to run. Users can verify that the troubleshooter and its fixes have been executed. To do this, run the troubleshooter from the Start menu. If something like Files On-Demand Troubleshooter appears with further explanations, the repair should have been performed.