The "Mac models that support HDR" table on https://support.apple.com/en-us/HT210980 says that MacBook Airs introduced after 2018 can only do SDR on external displays - if it doesn't include the 2020 Air, they'd surely have called that out?

You are right. I totally missed the SDR/HDR distinction because it is a single character difference.

My apologies!

It could be a function of their integrated graphics approach with the M1 (SoC), as opposed to simply having the right ports. That's just a guess, however.