Yes, it is possible to externalize Kafka on VMs. In fact, the documentation you shared provides instructions on how to configure external Kakfa as a stream service provider using prconfig.xml on Pega nodes. This can be done by setting relevant properties on every Pega Platform node or by using dynamic system settings, which are applied globally.
However, as mentioned in the documentation, VM-based deployments are not supported in Pega Platform 8.10. Therefore, if you plan to upgrade to Pega Platform 8.10, you may need to consider moving to a Kubernetes-based deployment. But for now, you should be able to externalize Kafka on VMs using the instructions provided in the documentation.
I hope this helps! Let me know if you have any further questions.