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The M1 boot process is very different from Intel macs. In fact, they do not support external boot disks at all, by design. This is because the built-in firmware is extremely minimal, and does not contain drivers for anything but the internal SSD. It doesn't even have a keyboard driver, or any kind of GUI other than showing the Apple logo and "Entering startup options" text, and some error screens.
When you boot into the "Startup Options" menu, you are booting into a special macOS partition in the internal SSD. M1 Macs use macOS as the moral equivalent of the UEFI setup menu.
So how does external boot work?
The "blessing" process done by the Startup Options screen involves copying the entire macOS Preboot partition - iBoot2 OS loader, Darwin kernel, auxiliary CPU/device firmwares, device tree, and some additional stuff - to the internal SSD.
You aren't booting from an external disk. You are booting from the internal SSD, with the root filesystem on the external disk.
Additionally, the integration of the macOS user credentials with the SEP means that you can't "just" take an install made on another machine and use it on a separate one. It involves importing user credentials into the local machine. This process isn't implemented properly yet.
As you might expect, this entire mechanism introduces a ton of corner cases around updates, boot selection, etc., and it is still very buggy and broken. The M1 launch was, when you look at detail such as this, very obviously rushed.
Further reading for those interested:
https://github.com/AsahiLinux/docs/wiki/M1-vs.-PC-Boot
A counterpoint would be around 2012-14 (can’t remember exactly), when secure boot was hitting the mainstream, the Ubuntu installer (and systemd) didn’t know that UEFI anything was stored on the internal disk and would wipe it out, causing many machines to hard brick (which then made Lenovo say “uh, we don’t support Linux, tough”, which wasn’t cool).
https://github.com/systemd/systemd/issues/2402
https://rufus.ie
Load a Windows 10 ISO and click Windows to Go, wait a couple minutes. Full Windows on a USB and it’ll automatically rediscover hardware if you move it to a new PC.