Am I going to run into transcoding issues with 7th gen i5 on several streams?

I have a 4th gen i5 and it can handle about three transcodes concurrently. You should be fine on that, especially if your users direct stream.

all but one of them have modern Roku or Apple TV devices.

These devices should be capable of direct streaming any video format. You’ll have to tell your users to change their streaming settings to always play original quality on remote stream. Plex defaults to 720p for remote streams.

should I use the 258GB M.2 already in the box for the config and database, or use the 2TB 970 EVO SSD?

The 256 GB should be enough. My Plex folder uses about 90 GB right now with all the posters and stuff. It’s been running on a SATA 256 GB SSD for almost 7 years now. My library is also pretty large, pushing 8 TB total now.

There’s no harm in keeping it in.