STRANGE Problem with iCloud after upgrading / downgrading from Sonoma

I upgraded to Sonoma, and then realised that it broke a piece of software that I need for my work. So I formatted the drive, installed Ventura and then did a recovery from a Time Machine backup.

Everything is playing nicely, except iCloud. For some reason I can't delete files off of my desktop when synced to iCloud. I get the following error (see screenshot).

https://preview.redd.it/3cnlq0lbqxsb1.png?width=856&format=png&auto=webp&s=5d0da254eff4a06bc84a80a5283a33236887d1d3

I can go into terminal and manually delete the file, but not from the desktop. I have booted up in safe mode and checked the drive, and there are no errors. My working theory is that Sonoma did some things in iCloud that I need to reverse because everything else in the recovery is working fine.

Anyone else see this before? Any suggestions on what to look for next?

THX in advance.