Have you found a solution to this? I am having the same issue. I have 3 favorite folders on my main screen, which I added through the settings feature of the Apple TV app. I did a long click on folder A and selected to use local metadata, as I was testing things out. Now, I would like to change the setting to use online metadata, but when I long click on that same folder there is no option to switch back. The only options that display are: rename, select artwork, hide favorite, remove, and cancel.
Even if I remove the favorite, and go back into the settings option and search for it through my share folder and readd it, it appears to keep the previous settings and uses local metadata. I have no idea how to recover back to the original state and have it use online metadata. This appears to definitely be a bug in the software to me. There should be an option to switch TO and FROM online metadata when you do a long click on the folder. As far as I can tell, it only goes one direction and then you are stuck.
Now, I have switched back and forth between these two settings from folders WITHIN the favorite folder (i.e. subfolders within favorite folder I have added to my library), but I cannot seem to figure out how to do it on the favorite folder itself. Any help would be greatly appreciated!