I have used VSTs for the majority of my productions. Why? Because there are thousands available and they are inexpensive compared to hardware and also sound good. Using VSTs nowadays people can make full tracks of all instruments. Some VSTs even simulate natural sounds e.g. a guitar fret sliding sound!
However recently I purchased a Korg keyboard and was very impressed with the on-board sounds from it so I decided to record audio from the keyboard via my audio interface into my DAW which is Ableton Live. I did notice more of a warmer feeling after playing back the recording compared to a similar sound on a VST.
My piano VST is very nice and crisp but the audio recording through the hardware synth had much more of a live sound to it.
Which is best, Hardware or VST?
For main instruments such as keys, rhodes, pianos, guitars, strings, horns and bass I will definitely be using my Korg hardware as I feel it gives more of a natural sound. I may stick to VSTs for the drums, or simply the DAW drum machine as it is easier to program and on the hardware.
The good thing for me regarding using hardware and audio is the fact that it is light on the CPU. You can have multiple audio tracks running at the same time and will hardly effect the CPU usage. VSTs on the other hand tend to be CPU heavy. Your computer can quickly come to a standstill if you try to use too many VSTs with a slow processor.
A VST is do like to use to the Lounge Lizard VST which is based on the various Electric Pianos, Rhodes and Wurlitzer.