Good question - I ask myself the same question with my docking station on the M1Pro 2020.
Have a similar i-Tec triple 4K with 2x4K on the M1Pro 2020 - this one: i-tec USB 3.0 / USB-C Triple 4K Dock (1 x HDMI, 2 x DisplayPort, 85 W, USB A, USB C)
Does, with 2x4k and a piece of software actually quite well.

I don't think the 21 is fundamentally different and past the USB-C /TB standard, it will probably be more of a "stands and falls with the Displaylink software" thing - I can tell you more about that tomorrow when my M1 Monterey is received (should be rolled out tonight).
On the other hand, it should be possible to connect more monitors out of the box to the 21 than to the 2020...

Sorry, can't answer your question (yet)... don't have a 21 yet ;)
LG

Unfortunately, I can't really answer the question either. I have tried it with a MacBookAir (no M1). Physically connecting two monitors is no problem.

But you have to install software on the Mac. This actually works without any problems afterwards.

For me, however, the solution was still unsatisfactory, as the resolution of the docking station did not allow 2 x FullHD with HDMI + laptop screen.
I therefore only need it as a power supply and for an external screen.

LG