I could possibly survive with 40Mb but it would be difficult. It's not just "leisure" activities, I work from home in software development and IT and need to shovel a fair amount of data around so such speeds (and the associated reduction in upstream bandwidth too) would seriously impact my productivity and ability to do my job.
Sometimes yes, a faster connection with some issues is actually "better" than a slower, more stable one, although I accept that's not usually the case.
Depends how bad the issues are, but if you're reliant upon a good connection for work, then an FTTC connection makes sense in parallel with VM. At around a quid a day, that can be a solid investment, giving you backup/failover capability but providing the generally more reliable and lower latency FTTC for conference or video calls, and for gaming, whilst still having VM bandwidth for heavy lifting?