Yeah +1 to this. Really irritating issue as my display is blurry when scaled.

Any updates?

It's been 3 or so months since Apple acknowledged this issue - it's a shame there's no progress. I feel like I should return my M1 MBP.

There's a fix on Macrumors. Works for me on a 2560x1440 monitor. It involves SwitchResX, but not in the ways that have been mentioned previously. Can achieve a custom HIDPI res on M1. "Sorted! I have got HIDPI working on an external QHD monitor at whatever res I want on an M1 MBP! Also @ 144hz, despite preferences reporting different. Will also work for your Ultrawide. SwitchResX - create a custom resolution for INTERNAL display. Make it 2x the resolution you want, i.e. 3840x2160 for 1080p. Save it and reboot. Then, connect your laptop up to your monitor. Select the SwitchResX icon in the menu bar at the top. Activate the custom HIDPI res for your internal monitor. Once you've done that, press "turn video mirroring on", also in the switchres menu bar. This makes macOS behave weirdly, but it does the trick! Obviously you can only use your external monitor, and not your internal one (they show the same thing) but who cares."