As with many things, these answers depend a lot on your environment, that said, from my experience as a customer, partner (and now with VMware) here are my answers:
- Depending on the application both guest and application can be a good idea. If you have applications with agents, I think it often makes sense to use them.
- You are correct that if you need to recover the entire VM, you would recover the VM image and then the application backup (if it was needed - there is a likelihood that the application backup may not be needed)
- You are correct, you are very likely backing up the application data twice. Seems worthwhile to me for the right applications, you'll have to evaluate for your environment
- VR or backups can work as a DR solution, especially if RTO isn't an issue. The main difference I see between them is RPO. VR can go as low as 15 mins, backups are usually 24 hours so again, it depends on your requirements. One additional benefit to SRM is the ability to non-disruptively test your DR plan which I think is one of the best parts of it. Totally understand about budget. I would recommend building and testing your DR plan and communicating the resulting RPO/RTO to the business so they are aware.
Does this answer your questions?