In short, the System Requirements for Backup and Replication (and, it seems, for the Backup Proxy, although that does not come in to play as I am simply using the free version of Veeam for the moment) are fairly minimal. The question is, during the backup process (using either Network or Appliance Mode), how much data is actually stored on the host acting as the Veeam Backup & Replication server (or, for those able to use proxies, on the proxy) before being written to the backup target? The minimal storage requirements (and the discussion in the Backup Architecture documentation) seem to imply that only a little bit of data might actually ever be present on the server itself and data is just constantly handed off to the target. Am I interpreting this correctly or have I missed something (perhaps in the Free/Paid versions)?
The main reason I ask is that:
a) I'm hoping that, if the Free version is allowed to use the Appliance Mode, that putting the Veeam B&R server on the same ESXi host might help with backup times a little bit (don't expect significant changes, though, as the target will still be a remote filesystem and not SAN storage),
b) At the moment, I don't have a lot of storage to play with on the ESXi host (the two VMs are relatively large for our small environment), and so am hoping that only minimal storage would be necessary on the B&R host.
Typically at this point, the VM backup is also going to be relatively simple - I just needs some static versions of the Virtual Machines in question - changes will happen to them relatively infrequently, and I just need a baseline to work from (although hoping to keep downtime to a minimum

Thanks in advance for your replies to a relatively new Veeam user!