Not much luck with LR-PUAE. I've tried all the settings that I can think of but Gloom Deluxe runs slower than it does on Amiberry. The later 3D games may just be beyond the capabilities of the Zero2 at the moment.

Well, I found a solution.
I'll post it just in case anyone runs into my same problem.

I started from scratch using Pi Imager again. This time tho, I've been using the super magic hidden shortcut Shit+Ctrl-X to bring up a hid option panel!
Here I setup the wifi and the country. Then I flashed the sd.

When you first run the system inserting the sd back on the Pi, you'll have no wifi again for some reason. The system suggests to set the country (again) in the rasp-config, just click ok, and lo and behold, this time it works.

I could change the country to my zone, setup my wifi and access the Pi over the network connecting to \retropie

bingo.

I installed weekly build retropie-bullseye-4.8.5-rpi3_zero2w (24-Mar-2024 05:10) and added it to config.txt:

dtoverlay=vc4-kms-v3d dtoverlay=vc4-kms-DPI-35inch dtoverlay=waveshare-35dpi-3b-4b dtoverlay=waveshare-35dpi-3b dtoverlay=waveshare-35dpi-4b dtoverlay=waveshare-35dpi dtoverlay=waveshare-touch-35dpi

And I got a normal FPS!

@Dochartaigh The xpad devs reverted the change that broke the driver for older controllers, so it's safe to upgrade to the main version of the driver again.

Confirmed that overclocking does help performance. I made the following changes:
arm_freq=1150
over_voltage=3

ended up flashing the pi3 version and setting up ssh and it seems to work well now.

thank you everyone for the help!