Short answer, is you're right, you can't just copy it over.  Here's why.

Intel is like gasoline and ARM (M1/M2) is like diesel.  Both run vehicles, but they're completely different engines for completely different fuels.  Specifically Intel and ARM have completely different languages and instructions.

While there are technologies (QEMU) that let you emulate intel instructions on an ARM chip, the analogy there is that one is in english and the other in spanish - but you can only translate them by going through morse code in the middle.  That's really slow and cumbersome, to the point where the virtual machine is unusable.

The good news is that Windows 11 has an emulator inside of it that lets you run most (but not all) windows programs written for intel on a Windows ARM machine - and the performance there is pretty darn good (heavy graphics games, machine learning, or other code that really needs direct hardware access are the exceptions).  The only things that flat out don't work, are programs that don't run on Windows 11 (which is basically ones that don't run on Windows 10).

The bad news it that Windows 11 support is sort of meh at this point in Fusion.  It's good enough to get it to work, but it's missing big things like shared folders, and copy/paste between the host and guest.  Not insurmountable, but annoying.  We do expect to get much better support next year.

Technogeezer has written an excellent guide on creating a new Windows 11 VM - it's pinned in the documents section for the Fusion forum.  Highly recommended to follow it.  If at all possible, get an ISO from uuddump rather than the pre-made virtual machine, as the former won't expire.

The Intel to M1 transition is what I call a 'breaking change'.  There's a lot of things that you have to leave behind.  In my case, I dropped a lot of old windows programs and invested in new mac ones to simplify life.  Ironically though, I'm about ready to dump Banktivity for the Mac and use Quicken for windows because of constant issues and problems with it.  The mac version of quicken is really substandard, so that'd be one new thing I would put in windows.  In other words, Fusion works well enough (except those exceptions) that I don't hesitate to leverage is just as I did before...just on a new VM.

Make sense?