What is the best way to set up my new Mac Studio M4?

Depending on your personal thinking either of those will work. Some users hang onto the old wive’s tale of a “clean install” thinking it will make things pure and perfect. I started out with a 2008 Intel iMac. I migrated to a 2013 Intel iMac, then migrated to my current M1 MacBook Studio Max. I used my SuperDuper clone in three migrations without issues.

The only method I would not recommend is the re-install everything but that’s just my opinion. Take it or leave it.

A different approach, that does not fit all users

Personal Preferences

** Certain exceptions may apply " migrate from the old Mac Studio

If the new computer is going to be the Apple Silicon  Computer - would suggest Only Migrating the User Account and nothing more.

Some have had success and usually they are well seasoned veterans who are well versed in trouble shooting 

Others have been left with a mess when Migrating everything.

* *  Issues that may have existed on the older computer will be migrated to the New Computer.

This would badly pollute the new Original and Pristine installation of the new OS.

Applications, extensions and Software Drivers may or may not even work on the new computer.

IMHO - it would be best to only install new application etc Directly from the Developer or the Apple Apps Store.

Due Diligence on New Applications and make sure they are Sequoia / Sonoma / Ventura / Monterey / Big Sur compatible and factor in the ARMs CPU of the Apple Silicon Computer  

Assuming that you bring your backups up-to-date before the migration, options 2 – 4 should have the same result.

If you do migrate directly from the old Mac, I would suggest not migrating over Wi-Fi. That is likely to take longer, and to be less reliable, than migrating from a backup or over a cable.

If SuperDuper is working for you, then stick to it for backups and migrations.

I've personally migrated to a half dozen new Mac's using my CarbonCopyCloner backups.

I started using SSDs instead of HDDs for my CarbonCopyCloner backups and now migration is a snap.

I migrated the hard way from a 2000 G3 iMac to a 2006 iMac, then I started using CarbonCopyCloner. Using my CarbonCobyClone backups, I moved from the 2006 iMac to a 2010 Mac mini, to 2012 Mac mini, to a 2018 Mac Mini, to an M2 Mac mini, then to an M4 Mac mini.

My iPhotos/Photos Library goes back to 2000 and is still in perfect chronological order.

My iTunes/Music Library imported from my CD collection has grown 10 fold over the last 25 years.

Never had any issues using MA. I have used my TM backup and my clone from using Carbon Copy Cloner and never had any problems. I have several Macs.