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Yes. Your wallet's database is necessary for you to access your funds and you should always back it up properly. We're looking into ways to help our integrators do this, but currently it's a single file that they can encrypt and store anywhere.
We are also working as a last-resort recovery with the Ark server. This will obviously only work if the Ark server is being cooperative.
Yes, there's per-vtxo state stored on-device. You need the metadata associated with your vtxos to recover your wallet. One of the threads on Second's forum discusses making a backup format for this if you're interested in reading more:
https://community.second.tech/t/announcing-v-pack-independent-verification-and-visualization-for-the-vtxo-ecosystem/183
This is messing with my head. If I am using this and lose my phone and only have my seed phrase, is that sufficient to reconstruct my full balance and the entire VTXO transaction chain from on-chain data alone? Is there per-VTXO state stored on-device (indices, round data, specific tx chains) that I'd also need to have backed up to recover?