On my VM with server2008R2 the CPU load is always 95 to 100% so it is overloaded, but it works very fine. I have very few frame drops, but it is no problem for me. Due to the high CPU load the FPS from the cameras vary from 5 to 20, but it not limiting. I record in 10 FPS. All my cameras are on cable. For about 4 years ago I said no no to wifi and everything is on a Gbit backbone. I am very happy with that decision. All my cameras/servers/NAS´s/router/switches/… are on a separate energy system powered by an UPS. All this have saved me a lot of time and the reliability and uptime is extremely high. Yes, it has been some additional costs in this, but I need to have a system that I can trust.
Your system with these 5 cameras should really be no problem for the i5 or Xeon processor if you are running NCS with default parameters.
-what is the CPU load of the VM?
-what FPS do the cameras deliver? See bottom right corner on the video.
-what FPS do you save recorded videos in?
-since you have the licensed version you can test to enable Multi Threading in Settings - Decoding/Encoding. Running a VM do not support everything, but you can test. I do not use these in my system.
-the orange icon in the Event logs indicating Connection lost is typical when for example wifi drops out or if the energy to a camera goes down for a longer time or for a glitch on the voltage.
From the postings in this topic there are too many problems. So maybe it is a good idea to go through the whole chain from camera-network-switches-router-computer that it works correct. The frame dropping is typical when something is overloaded or the data traffic do not get to the codec in time.