Microsoft has a solution for this. It is called Windows Sandbox. The sandbox instances do not need as much memory as VMWare instances because they share parts of windows which are common to all instances.
At the same time, desktops, keyboard, and mouse are completely isolated, so they do not interfere with each other.
I found an article with instructions to set it up at https://techcommunity.microsoft.com/t5/Windows-Kernel-Internals/Windows-Sandbox/ba-p/301849
Let me know if you are seeing issues with this approach.
Another option would be to use multiple RDP sessions with a single windows instance. Each RDP session gives you a separate desktop with its own mouse and keyboard. But this approach is likely more complicated than Windows Sandbox because it is not as well supported by microsoft. If you want to try this, have a look at Multi instances Support