YouTuber “64jcl” is currently making a character mode, graphical OS for the C64 – and he is showing good progress. I’m personally really impressed by the smooth multitasking exhibited in the last video:
Regarding wireframe window dragging, I guess, windows may be copied to sprites, which wouldn’t be too demanding on runtime resources. Since this wouldn’t work for (very) large windows, there should be a fallback mode for this. Maybe, there’s also a restriction on window sizes, so that this would work anyway. (Mind that this is just me guessing.)
Regarding memory footprints, the applications shown are not that demanding. However, it does load bitmap images, which are a bit more substantial than these tiny demo apps. (Meaning, 8K for the bitmap, another 1K for the color information, space required for the encoded image (or some equivalent buffer) and some space for the display application. Which would suggest about 16K of free RAM, at least.)
Edit: The biggest application seen in the last video is about 5K and the image files are about 10K on disk.