Hi Haley,
I'm afraid it's a moot point as to whether the bent case will cause problems for the LCD or touch screen.
You see, on MacBook Air models, the display is all fused together, so it's basically unrepairable, meaning you can't just replace the case, or the LCD, or the digitizer individually; the only thing you can ever do is replace the whole display as one piece.
In other words, you can't do anything about it whether it will cause problems or not; the only solution is to replace the whole thing. It may or may not give you problems down the road, so your choices come down to either living with it as is until and unless it breaks further, or replace the whole thing, which isn't a cheap thing to do.
You can get all the parts and a guide to doing the repair yourself right here on iFixit; you mentioned it's the M1 model, so my best guess is that these would be the part and guide you need to do the repair.
MacBook Air 13" (A2337, Late 2020) Display Assembly - iFixit Store
MacBook Air 13" Late 2020 Screen Replacement - iFixit Repair Guide
crwdns2934105:0crwdne2934105:0
crwdns2934113:0crwdne2934113:0
crwdns2915270:0crwdne2915270:0
crwdns2889612:0crwdne2889612:0
4