I tried moving the iCloud Drive folder on Windows 10 to a custom location using mklink /J as described in Is there a way to change folder for iCloud Drive?.
Using this workaround, all iCloud Drive files are downloaded to the correct location and new files are added automatically as well. However, no change made on the windows machine is uploaded to the cloud. This includes adding new files, editing existing ones, or deletion.
Everything works as expected when the folder is left in its original location at C:\Users\<username>\iCloudDrive.