I wonder if you might be better off keeping the server’s data directory on the internal SSD… I have my own media library w/ approx. 20 TB of files filling the server’s data directory to no more than 70 GB (incl. OS etc.). So not sure what is filling your disk
Going with 16 GB of memory is certainly nicer… not sure if it’s necessary (or worth Apple’s 200 $ uplift from 8 GB). Probably depends on your specific use case, e.g. how many parallel streams / transcoding to expect, option to use a RAM drive as transcoding directory… and last not least how long you intend to run that server – for a more long-term invest I’d opt for the 16 GB.
PS: all the above is however not referring to an actual M1 setup (4 year old Linux server is still going sufficiently strong for my setup)
I have a 25" iMac M1 with 8GB of RAM with my Plex library on a 12TB external RAID and so far it’s running great. The M1 Macs have the memory integrated with the cpu so their performance is much better than an similar intel based Mac with much more memory. Prior to this I had an i9 iMac with 40GB RAM and the new iMac performs at least as well, better in many respects.