Like some of the other comments, if you really need a DE then maybe give XFCE or LXQt a try. The distro itself won’t matter too much in your scenario.
I do have an old laptop that has run Debian/Ubuntu + Gnome fine, not at all fast but usable for my needs. Mines has 4 GB RAM, get the feeling that going under 4 GB may be a bit much.
Otherwise Linux is perfectly usable without a DE if you’re willing to stick to the terminal for all your usage.
I still use Virtualbox, configuration is way easier with the GUI
To be fair you can pair KVM/qemu with any GUI manager and have a similar interface to VirtualBox/Hyper-V/VMWare/etc. virt-manager (https://virt-manager.org/) is a popular one for example, I just started using it and it seems to work well for what I need.
Normally I’ve been using VirtualBox but for whatever reason it asks me to recompile the kernel on Debian 13 just to launch. Meanwhile qemu just works.
Windows To Go was discontinued back in 2019 so it’s not really something that has been maintained or updated for a long time
https://en.wikipedia.org/wiki/Windows_To_Go#Discontinuation
Apps like Rufus (Windows only) are still able to create that sort of boot USB but it’s sort of a non supported feature, wouldn’t be surprised if it just stops working one day.
On Linux Ventoy is often used for this - it does have a persistence plugin but not for Windows https://www.ventoy.net/en/plugin_persistence.html
I haven’t tested this idea, but maybe you can run a Windows VM within Linux, enable USB in it, download Rufus in it, then you can create your non-official Windows To Go boot disk that way? Could be something to try if you never find another solution.