After deselecting a folder from the selective sync list, you may see an error: "The file or folder already exists on OneDrive."
Workaround Options
Option 1: Keep the file or folder on OneDrive: Delete it from the PC.
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It’s safe to delete it because it’s still available in OneDrive online. If you don’t want to have the folder in OneDrive and only have the folder on your PC, move the folder out of the PC’s OneDrive folder (see option 2).
Option 2: Remove the file or folder from OneDrive.
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With the file included in selective sync, move the folder to another place outside the OneDrive folder structure. This will delete the files and folder from OneDrive.com and make them only available on your PC.