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.
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.
I suppose that’s the main problem, I didn’t check the article since the title reeks clickbaity enough. However I wouldn’t share an article if the the title obviously is a clickbait, I’m sure there are bunch of respectable sources about this development.
Even if you cannot connect to internet (normally that shouldn’t be a problem since VM use the internet through host machine), you can still download the said iTunes outside of the VM and install it via shared folder. In the end you don’t need internet to put iPod some music.