How can I get out digital audio from my M1 MB Air to older Yamaha AV reciever?

The easiest way to do that might be to purchase an AirPort Express. They are discontinued but are readily available from aftermarket sources at reasonable prices.

Search for the most recent model A1392. The model immediately preceding it A1264 is also ok.

Do not buy the original model A1084 because it is no longer supported.

Configure it with AirPort Utility: AirPort Utility User Guide for Mac - Apple Support.

Use AirPlay to stream to it: Use AirPlay to stream audio - Apple Support.

The AirPort Express has an optical digital output.

A simpler solution is to just get a USB to TOSLINK/SPDIF converter.

Something like this would work:

https://www.amazon.com/Douk-Audio-Converter-Interface-PCM192Khz/dp/B085XPRSGM/ref=sr_1_3?crid=3A3L80UUQOC86&keywords=usb+to+toslink&qid=1645446171&sprefix=usb+to+toslink%2Caps%2C53&sr=8-3

or simply just search Amazon "USB to TOSLINK" to get a full range of options.

And for the sake of completeness, the first three Apple TV models also had optical digital outputs:

Identify your Apple TV model - Apple Support

Those would be the last three on that page.

Cal Digit TS3+ thunderbolt 3 Dock. Go to Cal digit and do some research.

Yes. If the source material is Dolby Digital 5.1 encoded, it remains that way. The Express or Apple TV will pass it through the optical port.