Yes, you are correct that this iMac has a split Fusion Drive. I don't think there is any data on the original 120GB SSD since there is no APFS Container, so you can just delete that EFI partition. Unfortunately using the Disk Utility GUI interface will just keep the hidden EFI partition there when you erase the drive.
To get rid of that hidden EFI partition on the internal Apple 120GB SSD, you will need to use the command line. First though, use Disk Utility to erase the whole physical internal Apple 120GB SSD as GUID partition and APFS (top option). This is so you can use that 120GB SSD for extra storage if you wish. Within Disk Utility you may need to click "View" and select "Show All Devices" before the physical drives appear on the left pane of Disk Utility.
Once you have used Disk Utility to erase that 120GB internal Apple SSD, then you will need to use the command line. Get the device identifier for the hidden EFI partition on the internal 120GB Apple SSD which in your screenshot above is "disk0s1". Keep in mind that the device identifier can change with each boot so check it immediately before using any Terminal commands on it. Usually the internal NVMe SSD like the 120GB Apple SSD will be "disk0" because it goes ready so quickly.
Once you have the correct device identifier for the internal 120GB Apple SSD, you can use the following command in the Terminal to remove that hidden EFI partition (replace "diskXs1" in the template command below with the correct device identifier):
diskutil eraseVolume FREE "NothingHere" diskXs1
If the device identifier for the hidden EFI partition on the internal Apple 120GB SSD is "disk0s1", then the command becomes:
diskutil eraseVolume FREE "NothingHere" disk0s1
This command just converts that hidden EFI partition into "free space" or unpartitioned space which is invisible to the Disk Utility GUI interface and even the "diskutil" command.
If you select the wrong device identifier (or mistype it), you may end up causing problems where your current macOS installation may not boot or work correctly since this command does not require any other volumes to be unmounted. Make sure you have a good backup of your data on that new internal SATA SSD just to be safe. It would be best to also disconnect all external drives as well to minimize the chances of a catastrophic mistake.
If you ever use Disk Utility to modify the partitions on that physical drive later on, then that hidden EFI partition may be recreated and you will need to repeat the Terminal command (after verifying the correct device identifier). You are safe to erase just the APFS volume using Disk Utility. In my testing only erasing the whole physical drive will cause the hidden EFI partition to return. I was able to erase the hidden APFS Container to make it into an HFS+ partition using the Disk Utility GUI without the EFI partition returning. APFS is optimized for SSDs so that is the best choice, but you could use HFS+ instead (aka MacOS Extended (Journaled) ).
