I see, it gets more complex without having the witness discount; so witness basically increases our potential by 3MB (4MB total) and without witness we still bound by original 1MB?

The total available blocksize varies depending on the outputs selected by miners; selecting more segwit addresses increases the possible max size from 1MB to some amount X <4MB?

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Yeah that's basically it. No witness at all, 1MB size. Arranging to have a huge amount of witness data in the block can get it close to 4MB. But that's extremely artificial.

Thank you for the clarification. This makes sense. I was trying to understand why the real world outcome is ~2.5MB vs the theoretical 4MB.

The speed of information (MB/Block) written to the chain depends on the outputs, and the maximum allowable blocksize varies between1MB-4MB depending if segwit transactions are selected and how much witness data is included.

Lots of complexity to take into account!