If the virtual textures work with “Texture 2D Object Reference” this should be compatible with my plugin. It would be important to test it in a build as the editor can behave differently in this case. You can create a variable with this type and test it.
As far as texture compression is concerned, it looks bad. I found a note of mine from December 2023. It says: “Probably not possible in unreal. According to the forum even not legal because of license stuff.”
Do you need Mip Maps? Without them, the memory requirement is significantly reduced.