Howard Oakley had a very interesting article today on how to install an older version of Big Sur onto a Mac once you’ve already installed or updated to a newer version. The problem is that even when you reboot into Restore Mode, you will not be given the option to install an older macOS version than what is on the Recovery partition and to make matters worse, on M1 Macs firmware is updated along with macOS so you can end up being in a situation where you cannot roll back a recent update you performed on your macOS installation.
The bottom line is that there are work-arounds, the simplest of which consists of creating a bootable installer and restarting your Mac from the recovery partition on that disk (or USB stick). If you then run the macOS installer from that, it will a) not muck with the firmware on your M1’s internal SSD, and b) it will allow you to install a macOS version that’s older than what’s on your internal SSD’s recovery.
Of course for M1s, if you’re willing to nuke and pave with a 2nd Mac at hand, you can also use Configurator 2 to set up the Mac from scratch (provided you have the ipsw with the older macOS and firmware) and then migrate all your stuff back from a recent TM backup. Then update to the desired version of macOS. But I think the method Howard proposed today is simpler and it doesn’t require a 2nd Mac.
Here’s Howard’s very detailed description so far as he’s figured this out. More likely to come soon as he dives even deeper.