I opted for 1TB because this will be my workhorse machine. I could get by with 512 GB, but I prefer to keep my iCloud Drive not set to "Optimize Storage" -- I'd just as soon have everything downloaded (and backed up locally) at all times. My Photos, Music and TV libraries will all go on a reasonably fast external drive.
For my M1 MacBook Air, on the other hand, I just got the 256 GB of storage because it's really a just a writing/general purpose machine and the iMac will do the heavy lifting as far as storage.