I don’t understand (I’ll be honest) how Apple did their resolutions so it’s confusing.
Yes, that would be because it
is confusing - don't blame yourself!
The ASD has a 5K panel but the default is something like half that. I guess my confusion comes from pixel density which was never a thing in the old days!
Just to be clear the default (2:1) mode for the ASD takes advantage of the full 5120x2880 resolution of the panel and - unless you are running ancient pre-retina software - everything will be as perfectly sharp as a 5k display can be, and most modern apps are designed for that mode. If you want to go down the rabbit hole of why Apple calls it "looks like 2560x1440" (and they've now dropped the 'looks like' just to make things more confusing) have fun - several people have tried to explain it here - but otherwise be confident that you
won't be wasting 3/4 of the pixels on your expensive 5k display.
The various "intermediate" modes give you more options for the system font/control size but the way they are implemented means that they're not
quite pixel perfect and place a bit more load on the GPU (if you've got a reasonably powerful, modern Mac that's not usually a problem). They're still much higher definition than the "looks like" resolutions that Apple uses to describe them, though.
If you want to save cash and get a 4k 27" display, its similar but there's a bit of a complication:
In "looks like 1920x1080" mode on 4k, everything is "4k sharp" (not qute as sharp as 5k, but pretty good) but - on a 27" or larger display - system fonts, controls etc. start to occupy rather a lot of screen space. On the other hand "native 4k/1:1/looks like 3840x2160") is not as tiny as native 5k and is
just about usable for young eyeballs. So you may end up preferring one of the "intermediate" modes which, again, aren't quite "pixel perfect" and put more load on the GPU. They will still be clearer than your 1440p display, though!
Those issues are real, but certain web/YouTube articles exaggerate the issue and will leave you convinced that a 4k display on a Mac will make your eyes bleed.