You can't connect two external monitors to M1 MacBooks with the extend mode. There exist a work around consisting of connecting one monitor through USB-C and the other with the help of DisplayLink software, but I do not know how good is this working. Possibly, we will see Big Sur update for 2020 MacBooks that enables 2 external monitors in extended mode.
No. That's an SATA 2.5" disk. You need Apple's proprietary 12+16 pin SSD module, Generation 5.
See this page for an extensive coverage of Apple's SSD modules, including those in your Mac.
You either need a second-hand Apple OEM part, or a third-party new one, such as ...