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File & Folder backups have the same ability to create Full, Differential, and Incremental backups that are possible with image backups. If that's sufficient for your version control purposes, then yes that will work. But Reflect doesn't have an interface to quickly view various states of a specific backed up file across multiple backups in a set. You'd have to browse each backup individually to access previous versions.
In terms of filename obfuscation, if you're referring to the names of the files within the backup as opposed to the name of the backup file itself, I believe that enabling encryption obfuscates files. But you could verify that with a hex editor if you want to be certain. Or Macrium might weigh in here.
In terms of your VPN destination, if it can be accessed through a UNC path, then you should be able to use it as a destination within Reflect. However, if you wish to run scheduled backups, then you'll need to make sure that whatever mechanism you use for setting up that access path makes it available system-wide. Some applications create a network drive that's only valid within the user session that is running the application, and that is a problem for scheduled backups because scheduled tasks run in a separate context from the logged-on user's session.