Okay, so, I've been taking a peek around the Mac forums recently (despite not owning one) and have seen a fair bit of unhappiness from a lack of iMac refreshes, namely the lack of a 27-inch model.
I'm a little confused on why people would rather use a single-part desktop PC instead of a "computer and monitor" solution, like Mac Mini + Studio Display.
So that lead me to the question... "What do you use your iMac for?" Considering the unique qualities of the iMac, I thought this would be a pretty fun topic. You can answer this even if your iMac is not a main device or you have more than one Mac. Any model works.
I initially bought a 2011 27" iMac as an upgrade from a very slow windows PC. At the time, it ticked all the boxes. It had a huge, gorgeous display that I could work with documents on (being a teacher), the specs were decent (I didn't do anything particularly demanding, and it could even bootcamp into windows and run games like darksiders2 and prototype). I liked the all-in-one form factor as it took up relatively little space, and being my first Mac, I appreciated that it came with everything I needed out of the box (eg: keyboard, mouse, webcam, decent speakers).
The other options didn't seem as appealing. The Mac mini lacked discrete graphics cards, the Mac Pro was overkill, and this being a communal PC that I would be sharing with my dad, a laptop didn't fit the bill other. The iMac really represented the ideal family computer. Easy to set up, reasonable price, huge screen for an aging parent.
When it was time to upgrade in 2017, the 5k iMac seemed like the obvious choice (though in hindsight, I really should just have sprung for the SSD). It was also particularly useful during the pandemic when school pivoted to home-based learning and my 5k iMac was just a great device to conduct online classes over, not least because it already came with a webcam, and the huge screen gave me ample room to manage my zoom interface.
Going with a Mac mini + external display option today would mean having to purchase some accessories all over again (like the webcam, and possibly speakers, if I am not getting the studio display, which I simply find too expensive).
You are right that a Mac mini + studio display combo is probably the next best replacement for me right now; but I am just not willing to spend so much at the moment (even right now, I am contemplating whether to get the ultra 2 Apple Watch or stick with my series 5). Especially when the 5k display on my iMac is still going strong and I guess it's a matter of which comes first - my iMac kicking the bucket or macOS finally coming with some must-have feature that finally pushes me to upgrade.