I don't have a proper answer for you, as I haven't used a mac since the early OS X (G4/G5) days.

That said, I do have some comments on your questions:

Several forum members are using SEQ on Raspberry Pi, so I know SEQ works on ARM. Which distro you use is probably more up to what's available for M1 as well as personal preference.

SEQ will build and run with Qt5, so if you have trouble finding Qt4, you may be better off using Qt5. There may still be some UI related bugs lingering, but the feedback I've received (as well as my own personal usage) leads me to believe that using Qt5 for SEQ is working pretty well. (Qt6 is another matter - there's still more work to be done there)

I think there are some dependencies that aren't documented in the INSTALL files, but if they're missing they should be caught when running configure, rather than waiting to get some obscure compiler/linker error. So if configure reports something missing, just install the development package for whatever it says is missing. Beyond that, if you discover a dependency that isn't checked/caught by configure, please let me know and I'll add checks for it.

I expect the most difficult part will be figuring out how to share the traffic. Unfortunately I don't know enough about modern Macs or Parallels to offer much guidance there. There may be a feature to allow you to mirror traffic between virtual interfaces. Otherwise, you may be able to cobble something together with bridging.

Good luck, and please let us know how it goes.