Run Windows on old Mac using external Boot Drive SSD

Hi,

I am resurrecting old hardware without buying a new machine, as my usage simply doesn't merit the new equipment, which would be simpler but expensive!

I am doing the following:

My (nearly) dead 2013 iMac has HD issues (likely a dead SSD in the fusion drive I have been led to believe, anyway I cannot trust it as far as I can spit) but other than that it seems to work quite well still for what I need!

I have a new SSD external drive with thunderbolt port from which I am going to boot Mac OS Mojave. Any newer and my support for legacy 32bit apps stops so its not worth it for now. I am quite happy with how to do all of this, and I should also then be able to also work from my wife's old laptop (2014 MacBook Pro), if I need flexibility or should the iMac fully break.

However,

I also need to run windows to run a drafting application.

I have a copy of windows 7, which I used to run on bootcamp on my iMac fusion drive. All this has been wiped when the HDD died, so I need to start again fresh.

I am unclear my best option going forward, and it may affect how I format my Mac OS boot drive etc.

I am told that I cannot run bootcamp (or windows in general) from an external HDD or SSD. Would it work instead to pay for Parallels on my external boot drive, and install windows inside there?

Can the external SSD therefore be APFS format?

Will time machine back up the virtual drive including the windows installation etc? I know TM doesn't backup boot camp partitions.

Kind thanks for the support!