Even with the way Photos work - which is desirable, I agree - I should be able to specify a limit on how much local disk it uses.

I don't know what the formula it uses is, but it's insufficient.

There is a workaround… You can create an APFS partition on your main drive, set it to a fixed size (e.g. 10GB), and then move the location of your Photos library to that drive.

Note that if your Photos library is already larger than you want it to be, you may need to make sure it's synced, delete it, and create a new library on the drive. It will then sync with iCloud. But that's a hassle, and I would back up the library before you do this.