I found the solution. Turns out there’s an app out there called switchx or something which tells you which resolution is scaled and which is not. Agree apparently the one apple let you choose is all scaled until you enable the show resolution as a list. And there are some hidden ones in there that are not scaled.
Yeah, scaled is best even with a 5K display. I ran into this problem a couple years ago trying out different apps to change my resolution from after the one I was using had failed to update to Universal. Well here's a screen cap from the app I currently use on my M1 MBA:
So as you can see, I use 1440x900 as my display resolution, but note how it says "Retina" on the side. That's the natively scaled resolution. But below, there is another 1440x900 that is NOT "Retina". If I switch to that, it has the same resolution, same scaling, but it looks much poorer.
If you need or want a greater range of display resolutions, there's another nifty app that can do it called
BetterDisplay. I'm not currently using it, but it has a wide variety of display customization tools, and one thing it does is create a "dummy" display that scales perfectly to your actual chosen resolution. So say you run the panel on your iMac (errr... Studio Display!) at its full native 5K resolution. BD can create a "dummy" display that scales to your choice and still looks crisp and clean. It's literal wizardry! I haven't used it much and only got turned on to it after I had already settled on what I use, but definitely check this out.
