...and what if, theoretically, Microsoft were to ban your account in error? In such a scenario, you could lose access to your own files because you can't sign in to your own computer.
Microsoft don't ban accounts. They don't even bother to enforce anti-piracy measures for Win 11, why would they ban your account?
If you had a ban, you'd probably be unable to access their forum and parts of their help system or error reporting. But even denying you customer service would be against the law.
Your PC and the OS you installed is functional regardless of how you use (or don't use) the MS account.
It doesn't even do anything if you decline all the offers. It certainly could do things, like sync across multiple devices but that's kinda useful.
Of course, there is every chance your usage statistics or data would be harvested.
I too wish Microsoft would ah heck off with user accounts on HOME PCs that have a single user anyway.
I'm not in a library, i don't need personal folders and i'm not interested in their ecosystem nor do i want Win 11 to connect to my phone, but they are deaf to all that.
And i do understand that they will not design a separate OS just for use cases like this. They design a behemoth, "one size fits all" system, and that's how it goes.
I don't really get why 11 gets this much hate since it's actually a good OS with some facepalm flaws, but that's Windows...
For anyone wishing to force Microsoft to not harvest or send telemetry, try Windows 10 Firewall Control from sphinx-soft (works on 11 too despite the name), or simplewall (open source).
It's not simple to define all the inbound and outbound rules, but you can certainly deny traffic over your connection unless you know what it is and actually want it. System connections require a paid version of WFirewallControl, but it's not expensive.
In addition to targetting Microsoft, such firewall tools will also allow you to keep potential malware out of your hair, block applications from phoning home or force block updates (with limits though).