I agree that the 780p camera is poor (whether the M1 camera it is worse than the prior MacBook Air camera is debatable - depends on lighting situations), so I went another direction for correcting the issue that Apple isn't interested in fixing.
I found the IriunWebcam free solution (www.iriun.com) that enables me to use my iPhone's 1080p camera as the video camera instead of the MacBook Air's built in camera - a much better camera that I already had. While you can go out and buy a dedicated external camera and connect it to your MacBook Air, I already had an iPhone and I don't use my iPhone while I am on video sessions... hence it just made sense to use my existing iPhone and it's charging cable to connect it to my MacBook Air (I actually connect the camera to the MacBook Air via a port on the back of my LG UltraFine 4k monitor that is connected to my MacBook Air). The only other piece of equipment you would need for this would be some iPhone stand so that it is stable and hands free to use. I personally have the stand set up such that the iPhone camera is just behind my MacBook Air's screen and just higher than the screen's camera location - this makes the iPhone camera angle and distance almost identical to the MacBook Air camera angle and distance.
While I would have preferred a better 1080p camera on the MacBook Air M1, this solution I use is a reasonable no extra cost way to achieve what I need.