I have recently updated to version 170.4.5895 on MacOS Ventura 13.2.1 on Apple MacBook with M1 chip set.
Indexing of Dropbox files stored locally on the Mac seems to be absent now.
I can search for files using the Dropbox app but search in the Apple file browser (called Finder) seems to have been blinded.
The files are there on the local file system and you can browse them, but you cannot search for them there.
Mostly, I use the search box on the Finder window on Mac to find files. It allows you to search either the folder you are in or the whole computer.
All of the search methods on Mac appear to use underlying file indexing which seems to be missing out the Dropbox files where they are in their new location, post-update.
I am told today that Dropbox engineers are aware of the problem and are working on a solution.
There was a similar issue with Google Drive. see https://www.googlecloudcommunity.com/gc/Workspace-Q-A/Mac-Spotlight-not-indexing-Google-Drive-files-in-desktop/m-p/167774. I do hope that we do not have to wait as long for a solution as we did with Google.
If there is a simple, effective and tested fix for this, it would be delightful. Please post it here.