If I were the customer, I’d reject your proposal too. The old software has been working fine for 40 years, why would I want to find someone to rewrite it?
And faster, safer and future proof. I wouldn't be surprised at all if most 30+ years old software ran better on modern machines under a VM than say on 15 years old hardware without emulation.
Faster, yes. But not all of the things modern software does is pointless overhead. For anything networked, modern crypto is a must have if you’re going to interoperate with other devices. And I wouldn’t trust a windows 95 virtual machine connected directly to my corporate network.
I didn't try, but firewalling the VM shouldn't be hard since it talks through a virtual dedicated interface. Also, one can isolate it from the network and use only shared directories with the host so it can read and write files without going online.