The practical reviews I've seen (versus the 'ooh, something new' ones) comparing the M4 to M5 Air suggest that unless you're doing professional video, audio, photo editing or CAD - or gaming - the difference between the two is incremental, at best - and will likely not be seen by the 'average' user. RAM is always a consideration and you're looking at identical there. As for onboard storage - if it's a user's primary machine and they must have everything with them all the time, then yeah, the 512 is better. If, however, like you, they keep their stuff in the cloud (and / or stuff accessed less often in an external drive), the 256 GB is probably not a hardship.
(In my case with a 256 GB drive - I have 16,000 docs, 5700 pics, 5000 tunes and 169 movies on it - plus all the apps, iPhone backups, etc - and still have 95 GB free.)
I'd say save the bucks and go with the M4. If the discounts you are seeing is at retail, you might also want to check out Apple's own Refurb site for them, too. Aside from price, benefits include refurb units are individually checked (so arguably better than factory release) and free shipping. And they are eligible for full AppleCare.
I'd say your Intel Air suggests you're familiar with possible longevity of hardware - difference in support (hardware and software) only a little over a year apart on these two products.