I have a virtual camera going to Zoom and do not have a lag to speak of. The computer is M1 Macbook Air.

I recall that I had some issues. After fiddling a while, I disabled all the 4K options, etc. from camera and selected 1080p output. This is cropped down to 1280x720 output resolution. It's enough.

Generally speaking, video resolution is not important for the sense of quality. Just have decent lighting and don't frame your face like an idiot. To get sense of quality, I recommend investing a little bit to a microphone. People don't realize it but audio quality is the king.