I would definitely get at least the 512 SSD. I have 256 on my older Mini now and frequently run into space issues and have to move things to other drives, including the downloads folder. And you want this new machine to last you for years.Been waiting for one of these as my 2017 27" iMac no longer supports any software upgrades. I currently run a 2TB SSD external hard drive with MacOS on it and all of my work files are held in Dropbox.
Would the 256GB for all the apps (Adobe Creative Cloud + MS Office mainly) with the 2TB plugged in for my files be fine do you think or pay the £200 extra for the 512GB?
I also have 40GB RAM in this iMac (i5 3.8 2017) but presumably the faster Apple Silicon M4 chip and 16GB RAM will still be loads faster?
I also would be quite wary of dropping your RAM like that, and would go with the next step up 24GB or 32GB.