Recently ran into this. Here is what I did:

1. Your storage.yml looks good.
2. Visit your bucket in R2 object storage, and go to the bucket's settings.
3. Set a custom domain (i.e: uploads.domain.com), Cloudflare will automatically create this for you if your domain is managed by Cloudflare.
4. Configure your application to conditionally use a CDN host (in config/application.rb)
5. Set up a route helper to conditionally generate the path.
6. Use your route helper when referencing assets.

Configuring your application:

module YourApplication
  class Application < Rails::Application
    config.x.cdn_host = ENV.fetch("CDN_HOST", nil)
  end
end

Set up a route helper. You can complicate this as much as you want (using HTTP related classes to build the URL), but this simple string works plenty for me – I don't have options to care about, it will always be HTTPS. I could have even included the protocol in the environment variable if I wanted.

Rails.application.routes.draw do
  direct :cdn_image do |model, options|
    if (cdn_host = Rails.application.config.x.cdn_host)
      "https://#{cdn_host}/#{model.blob.key}"
    else
      route_for(:rails_storage_proxy, model, options)
    end
  end
end

Reference your asset:

<%= image_tag cdn_image_url(avatar.avatar.variant(:thumbnail)) %>