Where to use function or action?
Well answer depends on the scenario. If we want to use the OR feature then you have to go for Action only. If the functionality is not about any automation script i.e. a function like getting a string between to specific characters, now this is something not specific to QTP and can be done on pure VB Script, so this should be done in a function and not an action. Code specific to QTP can also be put into an function using DP. Decision of using function/action depends on what any one would be comfortable using in a given situation.