One thing of note on M1 Macs, the internal recovery volume will be what ever the latest OS version that has been installed, regardless if it is installed internal or external. Example, installed production macOS Y on internal drive. Then install macOS Z on the external. The internal recovery will now contain the Z recovery and attempting to recover the internal Y install will only get offered the Z OS to recover. I have verified this when I was running Monterey Beta on my external Samsung T7 SSD.
Also note, on M1 Macs, the recovery/firmware partition is not cloned and it is necessary to boot an M1 Mac. So, If the internal drive on the M1 Mac dies, with that boot partition gone, you cannot boot any drive, period. Also, because of that "special" partition on M1 Macs, you cannot clone an external clone back to the internal.
So, your recovery options on an M1 Mac should the system get corrupted:
- Assuming the recovery portion is still good, wipe and re-install macOS and then either restore data from Time Machine backup or use Migration Assistant with the clone to restore apps and data.
- Use Apple Configurator 2 to Restore macOS and use the previously mentioned methods to restore apps and data.
If that boot partition on M1 Macs gets corrupted, assuming the drive is still good, it can be "Revived" using Apple Configurator 2 without wiping the system.
BTW, Time Machine, at least on M1 Macs, does not do a full system backup. It only backs up the Macintosh-Data drive and therefore can no longer restore a complete system (Big Sur forward).
Unfortunately in the cause of security, Apple has made something that was quite simple and made it difficult.