Unless you want to use your cheap 4k monitor as an equivalent 1080P display (which is not a lot of space for today's standard) it's not at all viable.
2560 is actually 1440p and no, it's not very good, even with BetterDisplay without even talking about the performance and rendering implications.
The fact is that if you buy an expensive Mac desktop, you need to also buy one of the few expensive displays that can work properly with it, otherwise you get degraded experience or compromise, which is unacceptable for hardware this price.
We are in this situation only because of both engineering and commercial decisions from Apple.
Considering that they sold an entry level 27" iMac for a lower price than what the Studio sells for, well into 2021, the position is indefensible. Even if they wanted to make an external display, they didn't have to make it that overbuilt/expensive without any other choice.
It is purely profit motivated move, because they want to extract 50% margin on everything, the old iMac was a low margin device and it's really the only reason it doesn't exist anymore. Conveniently all of that is supported by an unnecessary engineering decision (they didn't have to remove subpixel rendering).
Why do you feel the need to defend a mega corp terrible choices, only made to milk you as much as possible.
As for the niche thing, having installed/managed quite a few of those old 27" iMacs, I can tell you they were extremely popular, precisely because they were cost effective. I think you largely underestimate how large the customer base for the 27" iMac was.
As far as I'm concerned, it's way less niche than a 650$ headphone, but the difference is that they can milk 50% margin on those while a big iMac at that margin target would put it in a price territory where most wouldn't even consider.
So yes, you can get a cheap display to have a price contained setup, but it's really not a great experience and doesn't make a lot of sense to comprise if you are going to get an expensive computer in the first place.
At this rate you can get All-in-one 27" PC for not much more than a standalone display, it's not going to be great but at least it's cheap. If we are going to compromise, at least do it right.