Interesting but ultimately limited when you read the small print...
For the moment I'll ignore that Microsoft's justification for this is about having a smaller attack surface, controlling the data, not having international data traffic flows: all things that for the past 12 years they've been at pains to tell us they can absolutely 100% do inside their public cloud.
I'm sure their corporate pants are all on fire as we speak...
(It's also exactly what they refused completely to do for us on a UK Gov project back in 2017....so convincingly that the seniors just shove da load of really sensitive data on to the Public Cloud despite it having quite a few legal issues by doing so.)
But I digress, so back to my point : this is kind-of an interesting proposition and will undoubtedly get a lot of Microsoft fans really really excited - but I suggest they go read the small print in the Microsoft Learn pages.
https://learn.microsoft.com/en-us/azure/azure-local/overview?view=azloc-2602
Azure local is designed to operate on / as a Hyperconverged infrastructure and in this model you can have a mind blowing 16 physical hosts.
WOW - that's like nearly a complete rack...
The ability to go bigger isn't yet in general availability, and the way it scales is inherently limited - think dozens of machines rather than the notional 'hundreds' that Microsoft references.
When you move to a potential multi-rack you also appear to limit your machines per rack to 8 (according to what the Learn pages say) - so 'hundreds' of servers would probably fill a data hall.
The 'NEW' feature of Disconnected Operations isn't going to be available to everyone - Microsoft are absolutely clear that you need to be qualified in by them to be a customer.
Its 100% down to Microsoft if you get this service and its likely that lots of folks won't be deemed worthy.
It might well have now reached "General Availability", but that doesn't mean its Generally Available...
If you DO however get Seattle approval - the Microsoft version of a Willy Wonka Golden Ticket - then you can have your own small and isolated Azure (kindof) on which you can run Exchange and Sharepoint and other stuff.
Stuff that you could actually run on prem over a decade ago; although back then you could have more than 16 servers...
AMAZING achievement - well done MSoft... I can see why it took you a decade to get a sufficiently brass neck to present this as an 'advancement'