No. Gen1 images use a fixed allocation pool instead of an oversubscription model. You need a gen2 image with a cooperative memory allocator on the guest in order for this to work properly.

Well, so barring ancient HyperV versions, all VMs do it. This is more of a guest thing than hypervisor thing, anyway. All the VM needs to support is balloning and this is completely unrelated to paravirtualization.