Large-scale direct-drive wind farm grid connection systems are typically composed of permanent magnet synchronization generators (PMSG) and modular multilevel converters (MMC), forming a complex interaction mechanism after interconnection. Additionally, the full-power converters of the direct-drive wind turbines and the conventional vector control strategy of MMC result in low inertia and low damping characteristics, making it difficult to maintain frequency and voltage stability in the direct-drive wind farm connected via MMC transmission systems. To address this issue, this paper establishes a small signal model of multi-region direct-drive wind farms and an MMC transmission system under virtual synchronous generator (VSG) control. The dynamic responses of the electromagnetic transient and the small signal model are compared to verify the correctness of the small signal model. When the output power of the direct-drive wind farm increases, the system faces stability risks. The participation factor method is used to analyze the influence of the parameters of the voltage outer loop and circulation suppression controllers on the stability of the grid-connected system. The root locus method is applied to determine the feasible parameter range, followed by parameter optimization. The effectiveness of the parameter optimization is verified through PSCAD/EMTDC simulations, providing a theoretical basis for parameter selection.