Minimum disk partition for Windows installation increased to 48 GB?
Boot camp assistant is not allowing me to reduce the Windows 10 partition size to a value lower than 48 GB.


That sounds about right as a practical lower limit for Windows 10. The Microsoft system requirements you're referring to are the absolute minimum resources required for the operating system to be installed; using Windows with that little disk space will be painful, and you are likely to have difficulty installing and using even basic desktop applications, let alone games.

(Running games from an external hard drive is inadvisable. Not all games will even run from an external drive, and performance will suffer heavily.)


  I am also considering to install Windows 7 or 8.1 to save some space while maintaining compatibility with games.


Don't. Both of those operating systems have exited their mainstream support phases, and the extended support phase for Windows 7 is ending in January 2020. Using them for a new system is a bad idea.