I’ve moved your post to Tape dedicated subforum since the functionality you are looking mostly relates to the existing tape features of Veeam B&R.
I'd like to be able to do file level backups as I dont really need to store the entire VM on tape (happy to have it on disk).
This one is completely covered by existing File to tape job functionality of the VBR. This feature is included in all editions (even in Free edition), so its worth checking. For more details please refer to this Help Center article How Archiving File to Tape Works
There is an option to use VSS on file level backups but it didn't mention if logs were going to get truncated. I'm assuming they don't.
Correct - VSS can be enabled, but without log truncation.
Also, with tape backups, is de-dupe active for them ? As I back up a number of windows and linux VM's, dedupe would likely reduce the size.
There is no deduplication - only hardware compression option is available . However, if you are talking about putting VM backups to tape – deduplication can be enabled within the regular backup to disk job.