Click on + to select the ISO from file. It will start the installation process. Install Windows 7 with its steps. 20 GB space and 4 GB RAM would suffice for virtual machine.
I have Nano 7 as well and I tried many things over the years. However there isn’t a good solution to this. I have a Windows 7 VM just for my iPod and installed an old iTunes just to put music on it. You can use Gnome Boxes for this job.
I don’t know if there is a unified tool for that but I use btop and nvtop side by side. I don’t really care but if there is one, I’d like to know as well.
You described EndeavourOS if you ask me. It’s Arch but preconfigured, so ready to use after install while being as configurable as Arch if you want to go further. Has AUR so you won’t have problems finding a program.