Following up on this, I've been able to track down that Finder does show the progress indicator even when the Downloads directory is within iCloud Drive only before iCloud notices the in-progress download file and starts trying to upload it (i.e. until the dotted-line cloud icon appears), which then overrides the progress indicator.
So I think the underlying issue this post is about is Orion is not setting whatever attribute Finder/iCloud Drive requires to say "do not sync this file to iCloud Drive" (which should then be cleared once the download completes).