I have solved the current problem booting external SSD from a Mac Mini M1:
I looked at various threads and followed all suggestions. Nothing worked.
I used the regular USB 3 cable, not the thunderbolt.
Here is the solution: Partition the SSD as exfat. I suppose FAT or NTFS would work as long as you format the drive differently. Telling it to erase the APFS with another APFS including volumes, did nothing. After you format as EXFAT, then you can partition again as APFS.
I installed the external SSD while booted into Big Sur on the internal Mac Mini SSD.
I invoked the Big Sur Installer from my desktop and told it to install on the external SSD.
I can boot from USB 3 and from USB C Thunderbolt.
I am encrypting with Filevault now.
Everything works as it should.
I DID NOT downgrade security.
I looked at various threads and followed all suggestions. Nothing worked.
I used the regular USB 3 cable, not the thunderbolt.
Here is the solution: Partition the SSD as exfat. I suppose FAT or NTFS would work as long as you format the drive differently. Telling it to erase the APFS with another APFS including volumes, did nothing. After you format as EXFAT, then you can partition again as APFS.
I installed the external SSD while booted into Big Sur on the internal Mac Mini SSD.
I invoked the Big Sur Installer from my desktop and told it to install on the external SSD.
I can boot from USB 3 and from USB C Thunderbolt.
I am encrypting with Filevault now.
Everything works as it should.
I DID NOT downgrade security.