I have my downloads folder symlinked to an iCloud folder so that it syncs across all my devices. Whenever i try to download a file I get a "failed" message.
In settings it shows the shortcut fodler icon. (I think it brought the setting over from Safari or Previous installs)
Once I reset it to a new folder (the same one, but selecting it again) it all works.
I suggest that if a download fails because it's something on the local filesystem, there should be a message or indeed a message and taken to the settings to fix, or a dialogue to choose where to save the file to.
Version 0.99.128.2.1-rc (WebKit 619.1.11.111.2)
Sequoia (15)