Hi William, the SSD indeed works as additional storage, it does not replace the PS5's internal storage but rather expands it. I just picked one of the more affordable options here, but the heatsink "trick" of course can also save money on SSDs with higher capacities.
Just because Sony requires an SSD with a heat spreader for the PS5 storage expansion, it does not mean that you actually have to buy one of the more expensive M.2 SSDs that feature a stock heatsink, most of which are currently out of stock anyway.