Power outage resulting in disk wipe, now iMac keeps restarting and won’t update.

I'd say try restarting in Safe Mode while using a wired keyboard, do not use a wireless keyboard unless it comes with a USB charging cable. If you have one of these cables plug it into the back of the Mac and the keyboard and continue holding down the Shift key until it starts up in Safe Mode. If it starts in Safe mode, then re-start normally and test it.

If the Safe Mode restart does not work, the power outage may have corrupted the internal HD and you will need to take it to your local Apple Authorized Service Provider to professionally diagnosed.

I assume you were forced into using Internet Recovery due to the circle with a slash through it - correct? I am not clear from what you have written as to what your process has been and if I am making redundant comments or ignorant ones, I apologize! I am speaking from very recent experience with my iMac 2019, 1, 27 inch machine.

Maybe do Internet Recovery again, and check if Disk Utility via First Aid on the top level it presents to you - a Container under which are your volumes - can see something and fix it. You have to tell DU to 'Show All Devices' in order to view the entire hierarchy of disks. Click to 'Show Details' in order to see what it is doing and finding. Photos can be taken to aid your records of the problem.

If it produces an error report but is unable to repair it, then - it could well be worth erasing the drive again, taking you back to the only option which is to "Install macOS" - i.e. it does not offer any option for a named version of the OS such as Catalina.

This would then get you into the Apple servers' recognition of your machine and its original OS that came with it. The advantage is that none of the stuff you currently can see taking up space on the hard drive will be retained, and you will have a fresh copy of the OS, from which (once you are set up again) the iMac will likely offer you OS Sequoia. Give it time before you try to upgrade - there is a constant process going on in the background that may need to complete before you ask for the Upgrade.

One other thing to consider is that the RAM system may have been damaged by the power outage, knocking out one of the modules, causing the iMac to do random restarts. This can, in my experience, clog up the System data size substantially.

You could try switching out modules and seeing if the iMac stops doing its restarts - if the 2019 21.5 inch has the same access as I have with my 2019 27 inch.

Hope this is somewhat helpful but if not, at least some moral support!

Does your iMac have a Fusion Drive setup? Or I should ask.....did it have a Fusion Drive setup. I'm thinking you may have split the Fusion Drive when you erased the system and installed macOS onto a small internal SSD.

For random restarts....assuming it is not related to not enough Free storage space, then it would suggest the power outage also had a surge or dirty power that likely damaged the power supply, Logic Board, or the internal storage drive(s). These 2019 iMac Logic Boards are not the most robust since my organization has had to replace several of them.....that is unusual since we never had any Logic Board issues with any 2007-2012 iMacs.

Likely going to have to take it in.