External iSight camera with M1 Mac?
I too get the same results as you are getting. Works on my 2017 27&quot; iMac but no audio.
This video indicates that the iSight camera needs to be updated to Firmware 1.0.3 for the audio to work properly.
For the updater you would need an older Mac. I have an old PowerPC G5 but have not hook it up to see if the updater would work on it but I plan to try it soon.

How to update external iSight firmware?
External iSight microphone audio not working

I did see on one of Apple's pages that it indicated an external iSight will work with Big Sur. No confirmation if it includes Big Sur.
It doesn't work at all on my M1 Mini but system info can see it so that to me indicates the connection is good.
When I called to ask Apple about it the person wasn't of any help. They actually had not heard of an iSight camera, internal or external, before. The best they could do was get provide the link to the updater.