Leave files in place is generally a good idea and it works fine on the 8-bit 4k GH4 and GH5 codecs. Proxy is usually needed for best editing performance, so you're doing the right thing.
I have edited large amounts of 8-bit 4k content from the GH4 and GH5 and transcoded to proxy w/o any problem, including macOS 10.12.6. I've used the 2013, 2015 and 2017 iMac 27 and the 2016 MacBook Pro, plus 8TB and 16TB versions of the Thunderbolt G-RAID.
By default the proxies are created inside the library which also by default may be in your Movies folder. Is it possible your'e just running out of disk space as those proxies are added to the library and it's destabilizing the operating system? If your main library is on your system drive you can just copy it to the G-RAID. Ideally you might want the I/O on a separate drive but it's an easy troubleshooting step.
Just remember to switch the viewer from proxy back to optimized/original before you export, else the file will be at proxy resolution.