@dan00 That depends on what is available internally. I can not find exact specifications on the M.2 slot? I get the impression that it might be SATA instead of PCIe. Can you find out what interfacing the M.2 supports?
If it is PCIe you can use a M.2 to SATA adapter to create several more SATA ports to connect hard drives directly. This works better than external USB drives. Much more reliable.
@dan00 USB is not ideal. A direct SATA connection would be better for system stability. USB HDD's will work but TrueNas and OMV might display warnings discouraging the use of USB storage. If you can manage to break out some PCIe lanes you can use a PCIe to SATA board, resulting in a more stable setup.
@dan00 The specifications of the hardware seems enough to run a couple of VM's and / or containers. Given you have a reasonable amount of RAM installed.
The choice of OS and packages depends somewhat on what it is you want to do with it. A headless Debian or Ubuntu install would be an obvious choice. I have Proxmox VE on a little Intel NUC that has some stuff running on it. Other people might choose things like OpenMediaVault, TrueNAS or Unraid.
Do you already have an idea what you like to do?
@dan00 If the M.2 supports only SATA then you could use a different kind of adapter to turn that M.2 into a single SATA port and connect a large(r) 3.5 inch HDD outside of the laptop enclosure.
With PCIe you can create several SATA ports and create a small (software) RAID array.