I want to move the time machine backup from my 27 inch machine to this new one , but how do I exclude what I dont want to copy, since my nww machine is just 500GB ?
I think because your Time Machine backup is so large you would have to instead use either migration assistant to your old iMac (which would require you to have both iMacs on at the same time connected directly to each other or through your home network) or you would need to add the Time Machine drive to your new iMac (It should prompt you to migrate the Backup over to your new Macs Time Machine settings) and then enact Time Machine and manually put your files back.
Really though, do not rely on that Time Machine backup to get your files across. Should something happen to that drive you could lose all your data. I would really suggest you perform an iMac to iMac migration instead so that you still have the Time Machine backup as a last resort should anything go wrong.
By the way in case you're not aware, Migration Assistant enables you to select which files you want to move such as Media, Applications etc.
another option:
you could remove everything you don't want any more from your old iMac (assuming if it's something you do want to keep elsewhere that you've already saved it ie. to DVD/another external drive), and then do one last time machine backup of the final smaller file system and restore from that backup