Hi Anshuman!
Thanks for opening the issues and contributing. Sorry for the slow reply - (I am on a very long and very long overdue vacation, so my dev work is pretty close to zero for the moment ~_~. I think the other devs are in a similar place.)
To answer your questions, yes I do think that PyPy could speed up xonsh. I also think that Cython could speed it up, too. These are ideas that are definitely in the "I'd like to play around with" bin. However, it is sadly low on my priority list. So please, if anyone - yourself included - wants to go ahead and try alternative run times, please do!!
Personally, I don't notice a lot of lag. I am on 2015 Macbook Air w/ Ubuntu. Startup takes 0.1 - 0.2 seconds, which is barely noticeable (to me), and I have never noticed any problems with keystrokes. Memory and CPU usage are consistently peaked at 0.1%. However, I totally understand that Python is much heavier than Bash, and this can be potentially noticeable on some hardware configurations. If there is anything in particular that you notice, please report it, and we'll look into it for sure!
Glad that we successfully picked your brain :).