That is not what matters. Even if it only takes up 500 MB of video memory, that is still 500 LESS that the system has with M1. GPU and System RAM are the SAME now.
I wanted to replace my 8GB of system RAM and 8GB of GPU iMac, so I chose 16GB of RAM. Was I using all 8GB? Not sure. 4K resolution and 2560x1440 would definitely take up GPU just by being connected. Let alone the video editing, I am not sure how much GPU that was using too.
I admit I no longer get where you're coming from.
Let's review: you paid to upgrade one computer to 128gb of ram at pretty significant expense, and afterwards think you were misled because it doesn't speed things up that much. You admit that yourself.
You have another computer with 8gb ram and 8gb GPU ram - no evidence you were using or needed anywhere near that 8gb dedicated GPU ram (and probably anyone would tell you that 8gb system ram would be cheaper and more useful). It's possible - don't know but possible - you didn't need an expensive 8gb GPU at all; did you hear this from the same people who advised you to get 128gb of ram?
But you want to tell other people here 'that's not what matters?' Maybe you're not listening to the right people, or not understanding what they're saying, or not listening enough at all.
In simple terms: of course your on-board shared/unified video memory ... uses up onboard memory. But probably not as much as you think - by all indications not enough to justify an 8gb video card.
Shared/unified memory issue would've been true with intel too - and you would've seen more bang for your buck by just upgrading to 16gb ram with intel, too. (Does anyone _really_ configure an 8gb ram + 8gb dGPU system? Hard to imagine that making sense)
Anyway: yes, you should probably by a 16gb M1 system. It is also used for video memory. That's in the specs. But as with other uses, if you're not using that much system memory to begin with - just like with the previous macbook air - it's no more relevant than before, and because of better system speed, LESS relevant.
Whatever, good luck.