Well the current 500 gig SSD is running Sierra OS in order to retain use of some old software (Photo Mechanic, Aperture) which I still use.
Is your 500GB SSD an Apple OEM BTO one? I am going to assume it is for the rest of the post.
Also, is the SW you use not compatible with High Sierra? High Sierra is pretty stable, and might give you a better experience than Sierra.
BTW Safari is an absolute disaster on Sierra right now.
If using High Sierra is not an option for you, consider using Firefox as your browser.
it still gets security updates and performs pretty well.
The new HD (internal or external) would be the main unit and run the newest OS along with current software like Adobe creative cloud and Safari.
There are a bunch of options for you, really too many to list without knowing what you would want to do.
Here are a few:
If your blade SSD is still running well, you could use this drive for the primary OS you will be using.
There are some blade options, such as using adapters for SATA and NVMe drives, if this interest you, I can elaborate.
You could install a SATA SSD internally using the unused SATA port, this of course includes opening your iMac, and I believe you will have to remove the logic board to access the SATA port and run the SATA cable if you do not have a HDD already installed. This would give you speeds around 550MBps.
Use an external SATA SSD. You could get a SATA USB3 drive and buy the SSD separately saving some money. This would give you about 400MBps speeds. This would be the cheapest and easiest option. The downsides to this option is not as clean as doing something internally, slower than other options, and no TRIM support for MacOS.
You can use an external SATA TB2 enclosure and put a SATA SSD in it. This would probably be speeds close to the internal SATA, maybe 450-500MBps. It is hard to find cheap TB2 enclosures, and sometimes it is much cheaper to find a used one with a HDD inside, and then swap the HDD for a SSD. You can also do the above with TB1 a well, but the speed will be a little lower. All the TB drives have TRIM support, making them more attractive in not only speed, but TRIM as well.
You can use a TB3 NVMe drive. This will be your most expensive option, but also your fastest external option. Probably just as fast, or faster than internal blade adapter options. I am using the Samsung X5 TB3 NVMe drive on my Late 2012 iMac with TB1 and see speeds almost 900Mbps. Using TB2 on your iMac, you would probably see speeds of 1500MBps, maybe higher. The biggest downside to this option is cost and it could require extra equipment.
Depending on how much space you need, you could even just use what you currently have, and partition the SSD in your iMac, one for your older OS, and one for Big Sur. I don't think this will work if you need Sierra though, as I don't think that works with APFS, but High Sierra does.
Anyways, you have a lot of options, some are listed above. You could do a combination of options as well, and not just one.
We could really use some more input from you one what you are looking to do, what your priorities are, what your budget is, etc.