As I mentioned, indeed ~/Downloads was in fact a symlink that pointed my external drive.
Using the Finder, I deleted the symlink and replaced it with the Downloads directory that it pointed to on my external drive; drag-and-drop preserved its Extended Attributes:
nello@miniMe ~ % ls -l@e
total 0
drwx------@ 4 nello staff 128 Jan 22 12:39 Desktop
com.apple.macl 72
0: group:everyone deny delete
lrwxr-xr-x 1 nello staff 38 Jan 16 19:17 Documents -> /Volumes/Sidecar/Users/nello/Documents
drwx------@ 5 nello staff 160 Jan 22 13:14 Downloads
com.apple.macl 72
0: group:everyone deny delete
drwx------+ 93 nello staff 2976 Jan 18 08:40 Library
0: group:everyone deny delete
lrwxr-xr-x 1 nello staff 35 Jan 17 13:13 Movies -> /Volumes/Sidecar/Users/nello/Movies
lrwxr-xr-x 1 nello staff 34 Jan 17 13:13 Music -> /Volumes/Sidecar/Users/nello/Music
lrwxr-xr-x 1 nello staff 37 Jan 17 13:14 Pictures -> /Volumes/Sidecar/Users/nello/Pictures
lrwxr-xr-x 1 nello staff 35 Jan 16 19:26 Public -> /Volumes/Sidecar/Users/nello/Public
nello@miniMe ~ %
I tested AirDrop from my iPhone and it still put files in /private/tmp but after power cycling and logging in fresh AirDrop placed files in ~/Downloads, as expected. (Perhaps a simple log out/in would also have worked.)
Thank you again for your suggestion.