Play Protect while seemingly working doesn't exactly 'work' as such due to how the compatibility layer functions.
However regards to 'telemetry' Play Protect doesn't and couldn't send more than what apps you have installed which all apps installed in a user have access to anyway.
Play Protect also does most of the scanning etc on your device not in the cloud. The cloud is just used for getting the up to date database of known problem apps to your device.
Then as I said most of the automatic functionality ie removal of apps etc will be broken simply by how the compatibility layer works with the sandboxed play services to get them to function.
You can find more about how Play Protect works both on device and in the cloud here:
The toggle is a known issue and beyond Android 13 which is receiving the bulk of developer attention, it is likely gmscompat will be worked on to allow the toggle to be turned off as required.