I must admit, I find online upgrades painfully slow these days on VPS with less than 4GB/3vCPU, so I wouldn’t consider a smaller footprint unless really trying to save money.
As I had hoped, adding both my domain and subdomain to Sender Domains was enough to get around the issue of not being able to create email addresses.
As long as your Sender Domains are verified, you can send transactional emails from any “fake” address you want—noreply@forum.whatever.com, wordpress@whatever.com, etc.