I have the 2021 24" iMac with M1 and am using it with the included Magic Keyboard with Touch ID and Magic Mouse.
I have found that the Touch ID functionality and the touch-scroll functionality of the accessories will often (but not always) fail after the iMac wakes from sleep.
For example, I just woke the iMac from sleep after nearly 24 hours since I last used it. I woke it by moving the Mouse, which worked as always. I was prompted for Touch ID to log in, but resting my finger on the Touch ID sensor had no impact. It wasn't like a bad fingerprint scan - it was like it didn't try to scan at all.
I logged in by manually typing my password, then opened Safari and browsed the web. I normally scroll up and down by swiping my finger up and down the top surface of the Magic Mouse, but this time it didn't work. The mouse did not respond to swipes at all. Mouse clicks and normal moves still worked fine. When I visited a page with my password saved in safari, I was prompted for Touch ID to autofill the password. Again, resting my finger on the Touch ID sensor had no effect. I was able to type my password just fine - all the keyboard buttons work, it just isn't scanning my finger.
This has been occurring for the bast few betas and even the current RC2. I've created the bug report for apple. Is anyone else experiencing this?