The internal storage
cannot be upgraded.
Your options are:
• external storage (fast but not internal)
• a flush-mount SD card (kind of 'internal' in that nothing sticks out, but not particularly fast)
• replace the machine
As for how either an external drive or an SD card works, that depends on your uses. It's a separate volume, so if it's disconnected, you won't have access to those files. You could use it to store your DropBox files, but if you don't take the external drive with you when you go, you won't have access to them. You might want instead to use it for infrequently used files, apps that you don't need when you're not at your desk, virtual machine image files that you don't necessarily always need to have (if you leave your drive behind), etc. But if your Mac always stays at your desk, or if you'll always take your external drive with you, then you could move all your DropBox files to the external drive, freeing up all that space on your internal drive.
A flush-mount SD card (or microSD card adapter) would give you extra storage that always comes with you, but they're not particularly fast and not particularly reliable in the long-term (so make sure you've got good backups). And I think microSD cards top out at 1TB.
Full disclosure - I have a flush-mount microSD card adapter in my 14" MBP with a 1TB microSD card. It's slow but I use it for temporary files and miscellaneous stuff when I'm on the go and not connected to my Samsung T7 SSD or network drives. This is the adapter I have (add the microSD card of your choice):
https://www.amazon.com/dp/B0B6NKB2JF?psc=1&ref=ppx_yo2ov_dt_b_product_details
The benefit here is that I've got a super fast 1TB internal SSD and a second 1TB storage option for junk I don't care about. But there's a reason why a MacBook Pro internal 1TB SSD is a, what, $500 option above the base, while the 1TB microSD card was $120.
Whatever you choose, make sure you have good
backups of everything!