I think this is one of those cases where you have to try it out to see what happens. I doubt it is officially documented anywhere what would happen.
From my experience what would happen is that Finder would start treating the folder slightly different. I.e. for the ordinary Desktop folder, this attribute is mainly used to signal to Finder that it should display the Desktop folder as part of the iCloud Drive instead of as a “free-standing”, ordinary folder.
It should not break iCloud Drive, nor will it start synchronising the folder similarly to the Desktop and Documents folders.