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When you relink the SO to the file on the Desktop and then »Embed Linked« does that work out?
What have you done for all-purpose trouble-shooting so far?
Restoring Preferences after making sure all customized presets like Actions, Patterns, Brushes etc. have been saved might be a good starting point:
https://helpx.adobe.com/photoshop/using/preferences.html
https://helpx.adobe.com/photoshop/kb/basic-trouble-shooting-steps.html
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Embedding works but is not a solution in this case. I have a background that I need to exchange in 106 files multiple times, to produce 424 files alltogether.
I just tired to relink>embed>convert to linked but it will still build the OneDrive-path in the directory.
I will try to restore preferences, butI fear I had this problem for years and avoided it. I will keep you up to date.
Thanks for answering!
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What about using a non-desktop folder?
Could there be any issue with your user name?