Go for it, it's really worth the effort, even if it is a small one, with the bonus of being fun (at least for me it is). I can't imagine setting up my home network without pihole, and I'm considering setting it up at work, I manage a small network with 100 devices connected to the internet.

Can a Pi really keep up with that size of network or would you run it on more powerful hardware/a VM?

DNS is a very light protocol. In addition, responses tend to be cached, so it's not like the Pi would be hit with a dozen queries on literally every page load for every client on the network.

As @theandrewbailey mentioned, DNS is light protocol, I guess even older PIs would handle it pretty well. But, as a permanent solution, I would opt to set up on a VM/Docker so that I could have snapshots to quickly recover the service in the event of a problem.

If you have an existing desktop unused or something you can run it on any Linux. I personally run the PiHole on a Debian VM on my FreeNAS server (that is already running).

You don't even need to buy the latest model. I've been running mine in a Pi Zero for +2 years without any problem.

I'd suggest getting an RPi with an ethernet port, I've got mine running on an original Raspberry Pi.

I'm running the Pi Zero with a micro usb to ethernet adapter

I tried setting up a 3B+ with pi-hole, but I think it was overheating...I had it set up on a first-gen Pi, and it still works great.