I have a 2016 MBP13 w/ TB 8GB I5.
Running the LG UltraFine 5K display. Previously I was using the 4K one as well.
I had very many issues originally with Explorer freezing, black screen flickering, no logins, slowness etc. Some of these issues were resolved with a reinstall of the OS but then they came back. Lately I've been using the Apple Hypervisor setting, 4GB ram, 1 full gigabyte of VRAM and there are no black screen / flicker / windows explorer issues.
What I can tell you with certainty is that the parallels video driver scales atrociously. I can run both screens (MBP internal + 5K) in coherence and it's fine as long as your windows 10 applications do not use up a lot of screen real estate. (I am running in "best for retina mode") If however, you full screen something on the 5K display it can take forever to redraw itself. I have operations that take milliseconds natively (such as switching a tab on my complex Windows Forms application .NET 4.6.2) but this same operation can take over a minute when my application is full screen (in coherence) on the 5K display.
This is reproducible even without using full screen (in coherence), just by covering up more of the screen with windows 10 windows or by enlarging some of them. The scaling is definitely not linear.
I'm hoping the parallels team will buy a couple of these high res displays and re-write the graphics drivers. Full screen without coherence is also not good performance wise. A windowed (non-fullscreen) approach works really well, but that's obviously because it's not pushing this many pixels.
In a nutshell, try 1GB of VRAM.