Not sure what your budget is for a new audio interface is, but Focusrite second Generation USB interfaces are quite nice as are their Claret USB line, which are quite expensive for USB. Universal Audio now has a native Thunderbolt 3 interface called the Arrow that includes a single DSP to accelerate processing of UAD Plug-Ins.
Yes, the 21.5” as configured would be a good choice with the 65w 7700. Obviously, 32GB of DRAM would be better and future proof, but the price delta is so high. It actually cost more than just buying the DRAM outright from Amazon and putting it in yourself, but who wants to crack open the iMac the just bought. :/
You can hook up one 5K monitor and up to two Ultra HD or DCI 4K monitors to the 21.5” iMac later should you need the extra screen real estate -
https://www.apple.com/imac/specs/
There is a YouTube video where someone actually bought a 27” iMac with the i5, cracked it open and put in 7700K they bought on their own along with a 2TB SSD -
It’s quite enlightening to watch the benchmarks. The same could be done with a Core i7-7700, I believe.
Hopefully, there is an iMac update on its way soon and you will be able to update to a 6- or 8-Core iMac for the same price.