Hi Drubs and welcome to the community!
Your infrastructure looks good in general. Just have 2 comments on it.
You are correct, Hardware VSS is a preferable option since software VSS has a number of limitations
and can decrease the host performance.
And using On-host proxy is also is not a recommended approach. If you have an option to use offhost physical VM as a proxy, go for it to shift the processing out of the production hosts.