I have this text in my XML

<video>
  <model type='qxl' ram='65536' vram='65536' vgamem='16384' heads='1' primary='yes'/>
  <address type='pci' domain='0x0000' bus='0x00' slot='0x02' function='0x0'/>
</video>

If I change vram to 524288, my virtual machine will get 512 MB ? Should I use nvidia proprietary drivers on host if I want to emulate GPU video RAM or nouveau is okay ?

The qxl video driver is purely emulated, so the choice of graphics drivers used in your host does not have any significant impact on the guest usage. The "video RAM" the guest sees is allocated from normal host RAM.

So changing vram to 524288 should be sufficient to give your guest more RAM to work work. Of course make sure the guest has the qxl drivers installed, otherwise it'll be using it in fallback legacy VGA mode. Drivers come with Linux by default these days, and you can also get drivers for Windows with the main KVM windows guest driver bundles

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