Very slow machine despite low CPU and Memory usage

You have an issue common to most 21.5-inch iMac made between 2012 and 2019. Apple use slow and under-spec mechanical hard drives. Your performance is about as well as can be expected for that drive model:

Performance:

System Load: 1.91 (1 min ago) 1.83 (5 min ago) 1.84 (15 min ago)

Nominal I/O speed: 0.34 MB/s

File system: 45.85 seconds

Write speed: 63 MB/s

Read speed: 62 MB/s

New, this drive could do not more than about 80MB/sec. Modern internal solid-state drives do over 2700MB/sec.

The most cost effective option is an external SSD set as the boot volume. At minimum, the enclosure must be USB3 and the SSD inside must be SATA 6GB/sec for full benefit. You CLONE (not copy) your internla hard drive to the external SSD and use the Startup Disk Sytem Pref to set the external as the boot volume.

That low-cost option will increase data transfer to about 400MB/sec, a very noticeable improvement. and you ca, still us the internal drive for storage.

First, there is no reason to ever install or run any 3rd party "cleaning", "optimizing", "speed-up", anti-virus, VPN or security apps on your Mac.  This user tip describes what you need to know and do in order to protect your Mac: Effective defenses against malware and other threats - Apple Community.  

That being said you have CCleaner installed which will only degrade system and application performance and not help it. Uninstall it according to the developer's instructions. You can check to see if you've removed all of the supporting files by downloading and running the shareware akpp Find Any File to search for any files with the application's or the developer's name in the file name.  For Cleaner you'd do the following search(es): 

1 - Name contains ccleaner

2 - Name contains piriform

Any files that are found can be dragged from the search results window to the Desktop or Trash bin in the Dock for deletion.

FAF can search areas that Spotlight can't like invisible folders, system folders and packages.  

If you're considering an external SSD to boot and run from this one from OWC (MacSales.com) is a very good candidate: Envoy Pro EX with USB-C or USB 3. OWC has an excellent reputation for reliable hardware, excellent customer support and standing behind their warranties.

The external solution can be a little as US$100 and, when you sell this computer on, the external drive will still work on your next one. So it is not the case of throwing good money after bad.

New or used, if you replace this Mac, go ONLY for an internal SSD no smaller than 500GB. If shopping for new, that means you are now in the 27-inch iMac market, as Apple have limited SSD sizes on the 21.5 inch models to a measly 256GB. Apple refurbs are good value for money but you have to carefully look at specs to make sure you get the internal SSD and not a mechanical or Fusion drive.

Is it the hard drive limitations that causes the kernel panic?

As your hard drive is only slow, not unhealthy, it is not high on my list. My prime suspect are TWO third-party backups software packages that may be in conflict with Time Machine One aroused Etrecheck's diagnostic attention as needing cleaning up:

Clean up:

/Library/LaunchDaemons/com.easeus.dataprotectbackup.plist

/private/var/folders/lh/11twr9js38b43hx8zm9qpb040000gq/T/AppTranslocation/9E2C0934-E2DC-4805-834B-342F8D0471BE/d/EaseUS Data Recovery Wizard.app/Contents/MacOS/EaseUS Data Recovery Wizard.app/Contents/Resources/EUDataDaemon.app/Contents/MacOS/eudataback

That indicates the program could be still partially installed and some components still working.

Scheduled full backups need to be to Time Machine. Of-site archiving of small numbers of files as your save after an edit is fine for the other services but never try to back up a massive block of files that way. I use Dropbox for work files that I may need to access on the road from my notebook computer. Very handy.

Our wise Toad has also mentioned CCleaner. Remember, the macOS—catlike—cleans itself, and very well.

I've noticed that Affinity Photo seems to cause speed problems.

Could be the slow drive and big image files. I have an entry-level 2012 MacBook Pro running Mojave. It has a FAR less capable processor than your iMac and the same 8GB RAM. I've not use Affinity Photo a lot on that computer but I recall no noticeable slowness. In fairness, I upgraded it to an internal SSD about 3 years ago because that model had the same hard drive issue and yours. That model allowed easy user-replaceable parts unlike the sealed-case iMacs made after 2011.

macOS needs to be installed on the SSD. Most likely what happened is you didn't hit "View" --> "Show All Devices". That way, you can select the main mechanism name of the external SSD and use APFS and GUID.

Cheers,

Jack

Sorry if we keep going in circles, but the correct drive to format is the top "LaCie Mobile...".

Did you do that?

For adding and setting up an external SSD, please read: How to Setup and Use an External SSD as y… - Apple Community.

I don't know if you've already purchased an external SSD, but if you haven't, that User Tip linked includes some recommendations from the online Apple Store.

Cheers,

Jack

Hard to say. You can run Apple Diagnostics to check for hardware issues: Use Apple Diagnostics to test your Mac - Apple Support.

Don't use a Case Sensitive format.

And again, the issue is because you need to select the MAIN LaCie drive! (See Image)