After the update to 1.21.120, which became XBOX GDK, and the subsequent immediate update to 1.21.121 due to a Japanese input bug,
during normal play, after leaving it idle for about 5 hours (with the PC running and Minecraft active),
Minecraft's display became very choppy and laggy.
Both the surrounding display and key input response were sluggish, quickly transitioning to a “Processing...” wait state as shown in the attached image.
Checking Task Manager revealed Minecraft occupied over 4GB of the 32GB installed RAM.
This is likely due to memory leak-inducing processes present since the transition to GDK.
Even after running like this for over 15 minutes, Minecraft did not crash, suggesting this is likely caused by the accumulation of very small memory leaks over a long period.
MCPE-179496: This is different from the memory leak when the “Improved Input Response” option is enabled.
It's because it's disabled.
I suspect the memory leak occurs when the pause screen is disabled. This is because it also happens when left idle while the inventory menu is displayed.
4 GB of memory consumption would not cause lag like this with 32 GB of memory. Your lag issues are likely caused by something else. In your screenshot, I can see that you have a lot of cows nearby. Having too many entities in a world can cause lag like this. You also appear to have a resource pack and behavior pack enabled.
Do the same lag issues occur in a brand new world with no resource packs or behavior packs enabled?