Photoshop elements 2020 - unstoppable downloading

1 - Photoshop Elements and common image editors can't access directly files 'In the Cloud'. You need specific applications like the Cloud version of Lightroom.

2 - OneDrive, or Dropbox or other similar services work by synchronizing a real folder on your computer with the Cloud. Elements works on the files and folders dedicated to those applications in your drive just like with any other folders, but OneDrive monitors the changes in the dedicated folders and updates the Cloud copy in the background. That way you can share the Cloud copy with other users or devices AND if the files are deleted in your drive, they will be restored automatically as a backup from the Cloud. That's what happens if you believe you can work directly with the files in the Cloud and want to save space on your drive.

 3 - A better solution would be to move your library to another drive than the master (internal or external) and to have OneDrive sync that location. However, you will be able to share your image files on the Cloud, but not the catalogs.

An interesting discussion on OneDrive on the feedback forum:

https://feedback.photoshop.com/photoshop_family/topics/how-to-transfer-pse-2020-to-new-computer-current-computer-has-photo-files-on-onedrive