I cannot seem to restore from back up because the Library folder in the Time Machine backup is 462 GB and this will not fit, even if I remove every other selectable option.
Wow, congratulations for bringing up an interesting problem. ; )
If I understand correctly, you want to use Migration Assistant to migrate a user from your TM backup to your new machine, but since the user's Library folder is so large it won't fit on your new M1 MBP.
I can certainly understand why you'd
want to use MA to transfer the user -- it saves so much time in configuring the account and changing settings for all the apps you use. You might be out of luck, though...
You probably could do it if you could buy or borrow an external drive, though even that seems tedious, and it isn't immediately obvious to me what the best approach is. Would one install macOS on the temp drive, restore user data from TM, prune the Library, and then make a new TM backup? Or is there some better way?
Alternatively, it MAY be
possible to delete some of the contents of the Library folder right on the latest Time Machine backup and then do the migration (I'm assuming MA uses the most recent backup on the backup volume). IF my understanding of Time Machine is correct, in theory one could delete files from the latest backup and still have them exist in previous backups, so that should mitigate some of the risk. I'm
NOT really recommending you to try it, though.
I might try it (partly for the challenge), but only if I
knew I had another reliable backup on another drive or didn't care too much about the data.
So I think you will have to create the new user on your M1 without migrating, and manually adjust all the settings and preferences back to the way you want them. Then copy whatever user data you want to keep from the backup "manually."
I suppose Apple has little incentive to solve this situation, as they'll just urge you to buy more internal storage. : (
I'm probably not the only one wondering what in the world is making the user's Library folder 462 GB in size! (Perhaps a lot of Steam games?)