On other forums, progress is being made on bigger HiDPI resolutions on M1.
SwitchResX enables some resolutions, but nothing greater than x=3737, for some:
https://forums.macrumors.com/threads.../post-30712633
BetterDummy enables pretty much any resolution on a plain M1:
https://github.com/waydabber/BetterDummy/
Disclaimer: I don't have any DisplayLink product to test it on.