Q: Moving from iMac 20" to 21.5"...

So what is your plan? Are you moving the old drive to the new computer? From your question it sounds like you are asking about how to fit things on the 1 TB drive onto the 500 GB drive but then why the temperature sensor issue?

What OS versions?  I know older equipment was somewhat tolerant of just booting to an OS transferred from a different computer but I don't know how different these two computers are and if it would simply be wiser to install a clean OS on the new computer and migrate from the old.  If you are planning on going from a 1 TB to a 500 GB you may need to clear out some bulky files first but you can probably line those up easily (videos, photos, etc.

Migration Assistant will migrate system information. My recommendation though is to connect the Time Machine (or bootable clone) from the old computer to the new one when it arrives. When you start the new machine for the first time it launches Setup Assistant and it will eventually ask if you are migrating from another Mac. Select Yes and then follow the on-screen prompts. I have used this method for the past 10 years with multiple Macs and have NEVER had a problem. As a note....NEVER use Wi-Fi to move large amounts of information, use a USB connection because it's simple, relatively fast and reliable!

If you haven't already, please carefully read Apple's Move your content to a new Mac - Apple Support

Additionally, if you are contemplating disassembling your new iMac, be aware that you will void your warranty. The new iMacs are glued together and not that easy to take apart. And you won't have a warranty to rely on.