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I run Proxmox on my router (an Intel NUC) with an OpenWRT VM (though I used to run OPNSense, and might try going back to it later). It makes things more complicated, but I'm familiar enough with Proxmox that I'm okay with that complexity.
Setup right, I don't think you'd experience any performance hit in terms of your network, and your 8th gen i7 is likely better than my Celeron J4025, so I imagine your Web UIs will be fast enough even virtualized.
I virtualized my router because it let me experiment with different router options way more easily (I could switch from OPNSense to OpenWRT and fall back on my old OPNSense VM if I messed anything up, I could setup VLANs in a cloned VM and fallback to my old VM if I couldn't get it working, etc.). I'm a very indecisive person loll. But if there's no reason for you to virtualize it, then I wouldn't bother unless you just want to.
I vaguely remember my Intel NIC gave problems with OPNSense, but running virtualized meant I could use Linux drivers (via Proxmox) and give OPNSense a VirtIO NIC that it would be happy with. Oh, and it's nice being able to run the Unifi Web Server in an LXC on the router so it doesn't go down whenever I mess with my server PC.
Personally, I only run network-specific things on my Proxmox instance on the router (so, OpenWRT/OPNSense, and the Unifi Web Server). My more home-lab stuff is run on a completely separate machine. Like others have said, I don't want my internet to go down when I mess with my server.
If you do end up virtualizing ur router, in my personal experience using VirtIO network devices for the VM seems to work best for me (the E1000 seemed to hamper my upload/download speeds quite a bit, VirtIO made it pretty much line-speed โ that could just be OpenWRT quirks or my NIC, idk).