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I tested a GRE tunnel on a lousy link, and all traffic seems lagging and slow, but when I switch to a healthy link, everything run smoothly.

Is a GRE tunnel, in general, very sensitive to packet loss? I want to find out if any setting could reduce packet loss impact to the tunnel itself.

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A tunnel itself is just wrapping packets inside an outer packet as the payload of the outer packet. If the link which the tunnel packets cross is losing traffic, having a tunnel is no better than not having a tunnel. The problem could be exacerbated because packets may need to be fragmented because of the smaller MTU on the tunnel, and loss of any packet fragment is loss of the entire packet.

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