Working with an mini M1 for almost a year now heavily used in sw development I learned that I would not benefit that much by moving on to a more advanced M1 chip variant. It's all about single core performance which is the same with the M1 and the M1 Ultra (I learned that even in my most complex maven project build time is just below 20 secs, whereas 2+ mins are spent on integration tests once all things are build. So no benefit from building in parallel here). I absolutely agree with your assessment that an M1 with 16GB and 512 Gig of SSD will be enough for 90% of the people. However, I did go for a 1 TB ssd as the hackintosh I used before the mini had used more than half of its 1 TB storage already, with source code and VMs eating up SSD memory fast. I need to be more disciplined than I am to come around with just 512 GB of SSD.

But aside from better multi-core and GPU performance (another thing a sw developer does not need that much) advanced M1 variants offer more display and tb connections and even tb4 instead of tb3 which may be on the wishlist of someone deciding on what thing to buy.