Why does my 2017 21.5 iMac have a 28GB hard drive in addition to the 250GB SSD?

That’s a nice little bonus and although I can’t provide an answer, I recommend asking Apple:

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I seriously doubt you will find a 250GB SATA drive large enough for average needs.

Without iCloud optimization, I agree. However, I've been managing with 256 GB of SSD storage in my MacBook Air (M2, 2022). I have over 300 GB of files in iCloud, including an iCloud Photos library. However, since I use iCloud optimization, only ~60 GB, including macOS itself, is ever stored or downloaded locally on my Mac. I have another very large photos Library that's quite large at about 400 GB, but I store it on an external SSD.

I recommend the OP look into something similar for their smaller SSD:

• Free up storage space on your Mac - Apple Support
• Add your Desktop and Documents files to iCloud Drive - Apple Support
• Set up and use iCloud Photos - Apple Support

Jack

I had the hard drive element of the fusion drive on a 2017 iMac replaced last January. On the invoice, the "Action Summary" from the Apple Premium Reseller read: "New SSD fitted, fusion drive created, and fresh OS installed". My guess is that the second item was left out. As the SATA connection to the SSD has some limitations, it is worth restoring the fusion drive set-up to include the flash drive.

Please provide us with an EtreCheck report of your system so we can tell what you actually have.

It will help us get a good idea of what is causing your problem if you provide a report of your system, that way we do not have to play 20 questions with you. The report we are requesting does NOT provide any personal information and is extremely safe to use. Please navigate to www.Etrecheck.com and download the free version of EtreCheck. Once you have you downloaded the app and installed it, please run the report and save it. This report will help us get a good idea what has been installed on your system and help us be able to diagnose what may be wrong.

When you have your report, you can attach it when you reply to this message and we can then review it and help you determine what is needed to get your system running well again. 

For instructions on how to download your EtreCheck report and attach it to your reply to this message please click How to use the Add Text Feature When Post… - Apple Community

Likely explanation: Your iMac originally had Apple's incarnation of a hybrid drive, Fusion. A Fusion system consists of two drives, a small (24 and 28GB are common) blade-type SSD and a larger rotational drive. They are linked by software to act as one storage unit that is not as fast as a blade SSD alone, but far faster than the fastest rotational drives.

More info on Wikipedian here: https://en.wikipedia.org/wiki/Fusion_Drive

I surmise that someone opened the case and replaced the rotational drive with a 2.5-inch SATA solid-state drive. Due to its being harder to access, they left the blade SSD in place. Let's hope that the proveious owner was wise enoughto use a Crucial MX series SSD or one of OWCs. Not all SSDs paly well in Macs.

I seriously doubt you will find a 250GB SATA drive large enough for average needs.

+1 on postng an EtreCheck report.It will show exactly how the drives are configured and how fast they are,

28 GB is far too small to install macOS. If both drives are an SSD, you will still have good performance installing on the 250 GB drive.

Jack

Because macOS needs more space than 28GB to actually work in.

The listed size is the requirement for the macOS installer.

Actually running macOS, requires a much larger drive.