Unfortunately, memory bloat, performance loss and occasional lags are inevitable with any emulation solution.
My guess is that the best solution would be to target a Win NT virtual machine, instead of Win 10, due to the smaller memory requirements of the former. I’m not sure if PM could run on Win NT, but if it does it would be worth looking into it, especially since many parts of Win NT are now freely reusable, and there are some open source Windows alternatives that are based on NT (none complete yet, as far as I can remember).
Emulating a Win 10 x64 OS and then run a 32-bit would mean emulating an x86_64 machine, which in turn has to switch to 32-bit mode to run the 32-bit app, all of which adds layers of emulation to emulation itself (so no wonder that it ends up in a huge bloat and performance lag).
I remember that during the XP days I would use nLite to customize the ISO image of the Win XP installation CD, to remove unwanted services and components in order to create a lighter version of Windows, so I could create a slim installer for netbooks that had serious memory and processor limitations. While it seems that nLite has now been updated to support later Win version (including Win 10), when it comes to virtual machines it’s always best to use the lightest (i.e. older) OS version that work, and to strip it from all unnecessary services.
From what I can remember, via nLite I managed to reduce the XP CD down to a third of its size, and the resulting Win installation was much faster that the standard installation (there are so many services that ship with Windows which one could do without).
@jan.cosmigo, since nLite is legal to use (on one’s own licensed Windows installer), it should be possible to share nLite configurations to reduce the size of the various Win editions. Legitimate owners of Windows could then apply those configurations on their ISO images, using the nLite tool (used to be free, but it seems newer versions are not), and be able to create lightweight versions of the Win OS to mount as virtual machines on macOS and Linux.
Since Windows licenses also cover previous Windows versions (at least, this is what I remember), it should be possible to create a dedicate ISO image of the older Win OS version that supports running PM NG — if possible, using the 32-bit version of Windows, if available, so that the performance loss from switching from x64 to 32-bit emulation mode is avoided entirely. Also, older version of nLite (e.g. for XP) are completely free to use.