Can I have OnCommand (PM) create and manage the SnapVault relation and can SnapCreator then update that relation, or should i create the SnapVault relation by hand?
You can certainly create relationships through PM and have SC update them. The issue with SC doing update is PM is not aware of it, PM does not check what is happening on storage, it saves information to its database so it actually doesnt know when SC does update.
Should i attach an protection policy to the dataset?
You can but again if SC does update PM is not aware so it adds little value, SC would have to delete snapshots on primary and secondary.
Regards,
Keith