Does using VPN on insecure host improve security?
Yes, but only when the data is being transmitted.
The role of a VPN is mainly to provide for the confidentiality and integrity components of the security CIA triad. As soon as the data is transmitted from one endpoint (e.g: your private network) to the other endpoint (e.g: the external 3rd party service) in the communication channel , the VPN has served its function. What a VPN would provide protection against are attacks that focus on intercepting or maliciously modifying data in flight such as variants of Man in the Middle - MiTM.
By providing a VPN connection to your network for a potentially vulnerable external 3rd party service, you are essentially expanding your private network to that 3rd party service A VPN is powerless to protect against insecure endpoints or attacks that does not compromise the confidentiality and / or integrity of the data transmission itself. If the external 3rd party service is untrusted, you attack surface is mitigated but can still be significant with a VPN connection to your private network.