You've gone from 'us' to 'I'. Never mind.
"What if I, talking to him, am just making it worse?" That's OK, but unusual. (And not the point, of course).
Can "me/us talking to him" be a subject? I think it's possible, even though 'me' and 'us' are not possible subjects. "Me talking to him" is an active force.
A: What convinced him?
B: Me talking to him.
"What annoyed her was him talking to her." The subject is in bold. Yes, 'his', the genitive, is possible.
For me, the issue comes down to whether the fact that 'me' cannot be a subject also means that "me talking to him" cannot be.
PS: I agree that the red sentence is impossible.

Retired English Teacher