thanks for the response. I have done what you suggested and below are teh results. 

Yes I have plenty of room for the 500g. I have 1tb drive which was newly installed with OSX so nothing additional has been added yet. 

The virual drive is 500g

Get Info on teh drive inside the VM (big sur) is 85gig. 
Info from disk utility is also 85gi. 

The reason I need this to be higher than the 80 gig, is because I am trying to restore from time machine backup, with minimal information because I have settings that I didn't know I needed (crypto) that I can't get back unless I load up the backup. 

So my goal is to make the hard drive large enough to restore the time machine backup info and get those settings. But it keeps coming up with 'not enough space' which is what lead me to here.

Bret