Setting aside the VM setup question temporarily: where did you hear that you need to create the USB installer from inside a VM?
I haven't tried creating a Sierra installer from Big Sur, but in general it has been possible to use the createinstallmedia command line tool inside a macOS installer application from other versions of macOS (probably with a limit once you get too much older or newer than the target macOS version). I'm not sure if I've tried creating a Sierra bootable installer from Catalina (10.15) or newer, but I have done it from Mojave (10.14).
Sierra and earlier are now distributed as a disk image containing an installer package, rather than an application, which complicates the process.
Does your 2010 MacBook have a working OS at present? If so, you may be able to download the Sierra disk image on that computer, open it, and run the installer package, which will create the Sierra installer application. You can then use that to create a USB installer (or simply run the installer application).
If your 2010 MacBook has no working OS and you are needing to use your newer MacBook (running Big Sur) to get the older one up and running, then read on.
You can't use the Sierra disk image directly to create a VM. It is not a bootable disk image. The disk image contains an installer package. Using that package creates "Install macOS Sierra.app" in your Applications folder. You need that application to create a USB installer, or to create a Sierra virtual machine.
The catch: the installer package refuses to run if the version of macOS is too old (or too new) for your Mac model.
You didn't clearly identify your newer MacBook, but the fact that it is able to run Big Sur means it must be a 2013 or later model (assuming you haven't done any third party hacks). 2013 to Mid 2017 models can boot Sierra, therefore the installer package should work. Late 2017 and newer cannot boot Sierra, so the installer package will refuse to proceed.
The installer model check is bypassed if it is running inside a VM, so you should be able to use a macOS VM to open the disk image, run the installer package, and create "Install macOS Sierra.app". Your existing Catalina VM should be able to do this.
If Catalina is too new to run the Sierra disk image's installer package, then you could set up an older macOS version as a VM. High Sierra (10.13) and Mojave (10.14) can be downloaded as installer applications (rather than disk images). If your Mac model is old enough, you should be able to get them from Apple's support site. If your Mac is too new, then you should be able to get them from inside your Catalina VM. Once you have the "Install macOS High Sierra" (or Mojave) application, copy it to the host (if necessary), use it to create another VM, then try the Sierra disk image inside that VM.
