Yep I also use VEP6 with cubase 9.5 on a single machine. I went without doing this for years thinking "Why would you do that?" I owned VEP5 but never used it. But after reading others' posts on the subject and finally making the effort to move in that direction I'm very happy that I did.
I find (for myself) that if vastly simplifies the large template approach, and I feel (again for myself) that having the instruments and their plugins all hosted in a separate entity makes cubase itself run smoother as it's got so much less to do. Separating the 'audio sources' from the sequencer also is a little easier for my brain to understand in the middle of a big project too, and it's a bit reminiscent of working with racks of kit when we still had tape.
Broadly my arrangement is separate VEP instances for instrument sections (dead easy with VEP6) - bussed out to Cubase as stems, with instrument specific effects plugins either as inserts on VEP or aux busses inside VEP - and then traditional aux busses for reverb, parallel processing etc.. in Cubase.
So my cubase sessions really only consist of:
Lots and lots of midi channels; no VST instruments at all- only VST racks that are routed to VEP server instances; seven assignable FX aux returns; stem groups for mixing with VCA's attached to each. I also add Britson channel (very light processing and quick trim and EQ) to each stem group for extra level trimming, so I don't have all my faders in wacky positions.
When I render a midi track to audio the routing automatically stays the same in cubase so I also retain my stems in the correct places in the mix as sub-busses.
The main disadvantage I can think of is that when I want to make a change to an instrument in VEP I have to select it effectively twice - once in VEP and then go and find it in Cubase - and whilst I may actually have a methodical approach to where all the tracks are and the routing, sometimes that can be a bit of a nuisance. But on balance the up-sides outweigh such a negative.