Several reasons.
1. The wedge.
2. The lack of the notch.
3. A proven track record.
4. Lower price and good savings even without a “huge” discount.
5. The “new tech” isn't all that new! Or, to put it another way, the “old” tech isn't that old and certainly isn't passé.
6. MagSafe isn't necessary for a laptop that can get up to 20 hours of usage for many people before recharging.
7. The M2 looks dated; a clone of the MacBook Pro design from ages ago. It's a mini-version of the big MBPs, not an authentic Air. It's the M1 MBA that looks “sleek and modern”.
In short, the latest isn't always the greatest!
For sure, there are pros and cons, and trade-offs with both models, but these matters are not so black-and-white as some think and highly depend on people's personal preferences and budgets.
1, 2, 6 and 7 are your opinions. Here are mine:
1) The wedge is emblematic of the original Air, which, despite being exceptionally expensive,was so underpowered and hobbled that I had zero interest in it when it came out. Subsequent wedge designs had better specs, of course, but the first impression stuck with me. And honestly, until the M1, the Air had enough compromises and other issues to dissuade me from ever being interested in it.
More personally, I had a lousy Toshiba work laptop that had an (admittedly pretty poor) imitation of the Air's wedge design. I don't particularly like being reminded of work when using my personal machine, particularly since that work machine was slow as molasses and also something I used during a period in my career that I didn't much enjoy.
2) The notch is a non-issue for me. The M2's screen, even when you measure just the area below the menu bar and notch, is already larger than the M1's. The menu bar area is pure bonus space for an already larger, brighter screen.
6) The return of MagSafe is what finally convinced me to buy an Air. And its utility is not limited to when the computer is in use. I can now leave it charging on pretty much any surface I like, and not worry that our cats, or our robot vacuum, or my clumsy feet are going to snag the cord and send the computer hurtling to the floor.
7) The M2 Air is considerably more sleek and modern looking than the M1, in my eyes. And it feels great under the arm... It feels like I am carrying a thin, lightweight, high quality coffee table book. Again, the wedge design is 14 years old, which, by definition, makes it dated.
Moreover, the M2's Starlight color is the first gold tone from Apple that I ever liked - so much so that it's what I chose.
As for your other points:
3) Apple's success with the M1 SOC (and prior success with their in-house chips for iPhones) was enough of a track record to convince me that they know what they're doing with the M2.
4) I'll allow that the base M1 is a raving bargain. It's probably what I would recommend to my parents if their ~2018 MBAs needed replacement. I need extra storage and want extra RAM, however; 16GB + 1TB is the right combo for me. I considered buying an M1 Air with such a configuration from the refurb store, but it would have cost $1,399. I got the 16GB + 1TB M2 Air for $1,509, when you factor in education pricing (wife is a teacher) and the current $150 education gift card promotion. MagSafe alone is worth the extra $110 to me, and I am getting a bigger, better screen, better webcam and probably at least 2 more years of Mac OS updates as part of the bargain as well.
5) No, the "old" tech isn't old or passé, but there's no denying the fact that the new tech is, indeed, newer.