Let’s say I setup some subdomains and then point them to my home server via Cloudflare tunnel.
If I use one of those subdomains from my personal PC on the same network as my home server, to watch a movie for example, is all of that traffic going out to the internet and then back? Or does all the traffic stay internal once the connection has been made?
yes, its also called hairpinning. to avoid this you can use a local dns resolver.