This is basically the old Opera approach. Vivaldi was created by the Opera founders, is made up of ex-Opera staff, and has the goal of recreating an Opera 12-esque browser experience on top of the Chromium engine. If you liked Opera 12, you'll like their "bloated / OS-replacement" (also highly customisable, almost everything is removable) UI approach. If you didn't like Opera 12, you likely won't.
If you haven't tried the latest snapshots you're in for a treat: the UI now bundles a full calendar and mail client :D
I use Firefox as my daily driver today, but I was an Opera 12 user: the UI was bloated-by-default out of the box but the two important caveats were: (1) 100% customisability allowing you to streamline it easily, and (2) bloat never impacted performance at all (in fact Opera was the most performant browser back then for heavy tab use, even while the integrated mail client was indexing hundreds of incoming mails). I can see perf. being a bigger challenge for Vivaldi though since they have less control over the Chromium foundations... Curious to see how they get on with this.
> I've found nothing about how their sync protocol works
As far as I've seen they haven't released the source of their sync server[0] or protocol, but the mechanism seems similar enough to Chrome that they've likely stuck to using a similar protocol, just with their own server endpoint(s). It prompts me to use macOS keychain for sync encryption, as Chrome does, so this seems to strongly imply e2e.
The internals UI[1] also gives some nice data for the curious. It shows e2e as being enabled for me, but it looks like it isn't always (possibly only newer versions of Vivaldi support e2e and they need some kind of backward compat.)
[0] https://bifrost.vivaldi.com/
[1] vivaldi://sync-internals