The fact that you can see the files via the Terminal is excellent news; it indicates the data still exists on the disk, but the Finder’s graphical interface is glitching due to an interrupted sync. This likely happened because a feature called "Desktop & Documents Folders" was enabled upon login, which immediately tried to move all local files to the cloud. Since the storage filled up instantly, the process stalled in "limbo"—the system marked files as moved (showing 0kb placeholders to save space), but couldn't actually upload them, effectively freezing them between the computer and the cloud.
The first and most critical step is to perform a "rescue operation" using the Terminal to copy the data to a neutral location that iCloud does not touch, such as the /Users/Shared/ directory. Do not log out or change settings yet. Open the Terminal and create a rescue folder using the command mkdir /Users/Shared/Rescue_Folder. Then, use the copy command cp -R ~/Desktop/* /Users/Shared/Rescue_Folder/ to duplicate all visible and hidden files to that safe zone. Once this is done, navigate to Macintosh HD > Users > Shared > Rescue_Folder in Finder to verify that the PDFs open correctly and the .docx files have their original file sizes.
Once you have confirmed that a safe backup exists in the Shared folder, you can proceed to revert the system settings. Go to System Settings > Apple ID > iCloud Drive, click "Options," and uncheck "Desktop & Documents Folders." A warning will appear stating that files will be removed from the Mac; since you have already backed them up to the Shared folder, you can safely accept this. The Desktop will appear empty. You can then simply drag and drop your saved files from the Rescue_Folder back onto the Desktop.
If the .docx files in your rescue folder are still showing as 0kb, you should check iCloud.com via a web browser. Look in the Drive section (specifically the Desktop folder and the "Recently Deleted" folder) to see if the full versions made it to the server before storage ran out. If they are full size on the web, you can download them manually. If they are 0kb everywhere and no Time Machine backup exists, the file headers may be corrupt, but the text might still be recoverable by forcing them open with a text editor like TextEdit.
