This is because the desktop folder is planted inside OneDrive on Win 11.
Once you remove the Desktop folder out of OneDrive, or stop it from , you can change the installation location for the VR titles.
**Important: Before proceeding, copy the files in those special folders to another folder or external drive. Please don’t copy them anywhere under Desktop/Documents/Pictures. This is because disabling OneDrive backup for a folder erases the local copies of the files. Copying them to a different location beforehand will ensure that you don’t need to download them again from the OneDrive cloud.
Once you are done with back-up, stop syncing your Desktop folder with OneDrive:
1. Right-click the OneDrive icon in the Notification area and click 'Settings'.
2. Select the Backup tab, and click 'Manage Backup'.
3. In the Manage folder backup dialog, click on the Stop backup link for "Desktop"
4. Click 'Stop backup' in the confirmation dialog that appears.
OR, remove the Desktop folder out of OneDrive: