That is one option; Simple Lighting is not the only one but provides easy options to set up simple automations.
The only reported problems with smart bulbs as repeaters are with Zigbee bulbs. There are far fewer Z-Wave smart bulbs and so it could just be that not as many people have used them to catch this behavior, but that seems unlikely to me. I would definitely recommend keeping the Z-Wave bulbs always-on, as you plan; Z-Wave Plus does have some self-healing capabilities, so it's not necessarily sure disaster if you don't, but if your network is mixed with "classic" Z-Wave devices, they may not like it as much.
Yes, you can do direct association for on/off (for the Inovelli switches or dimmers) or on/off and level (for the Inovelli dimmers). Anything more than that will need to get the hub involved. You could also use the hub for everything instead of direct association for anything, with the disadvantage that you note.
Really, either should work in either case, with the difference being that you'd lose the possibility for direct association of level (brightness) without the dimmer. If you use the hub, the same things are possible with either: the Red version of either the switch or dimmer will send the same "scene" (button) events for multi-taps and holds/releases. You'll get an event sent to the hub for 1-5 taps up, 1-5 taps down, holding and releasing (one event each) up, and holding and releasing down. You'll need to use a custom driver or modify their driver as suggested in the forum to get the "released" event after the hold, but that makes either the switch or dimmer useful for "change level while holding"-type automations (start changing on hold, stop changing on release), though you could use multi-taps to adjust the level as well (but less intuitively in my opinion). Hubitat's native driver coming in 2.1.8 will likely also include "released" events, but you won't get any multi-tap beyond a double tap with that driver. In any case, my point is that you don't necessarily need the dimmer to actually dim.
In related news, I've had bad luck running Hue smart bulbs on the Inovelli dimmer, even with a neutral and the switch level set to 99 (100%)--sometimes they buzz or flicker as if they aren't fully powered. If you don't want direct association or the larger LED bar, I might recommend the switch in all cases. I've posted on the Inovelli forums about my problems (probably around a month ago) but have not received any responses. I suspect this is a problem with the dimmer and not the Hue bulbs per se. They've advertised this as working with smart bulbs and I'd hope that their own would be fine, but along the same lines I have no reason to believe Hue wouldn't be, either, so who knows...
Correct, association is a Z-Wave-specific feature. (Touch Link on the Zigbee side is probably the most similar concept, but there are no Zigbee inovelli products, and I have yet to see a hardwired Zigbee switch/button device that supports it.) But again, by putting the hub in the middle, you can create pretty much any automation you want regardless of what protocol any of the devices involved use--the nice thing about hubs, especially multi-protocol ones like Hubitat.
IANAL, but my understanding of the Hubitat TOS is that it is for personal use only. (Most DIY systems are also not something I'd want to be on the hook for supporting for other people, even if they work well for me, but that's another story.)
