Hmmm, my DVD/VCR combo unit can watch one media while recording another. Not that it matters in the least to me, as the only reason I'd ever put a VHS tape in is for a one-time transfer to DVD.
The advantage to having a 2-in-1 unit are two-fold : one, less space on the entertainment shelf, and two (and most importantly), the ability to copy VHS tapes to DVD seamlessly. The quality if going to be vastly better than connecting two seperate boxes together; some may call me crazy and I wouldn't believe it if I didn't see it myself, but in most cases the DVDs I make from VHS on my combo unit look even better than watching the VHS straight (and obviously have all the other advatntages of DVD as well).
Now, there is a slight disadvantage to a 2-in-1, just like any multi-use product. When one goes, you have to replace the whole thing - this is why I've never bought a phone/answering machine combo before. In this case, however, the advantages of having both in one outweigh that risk, especially with the liberal Wal-Mart return policy.
I had a large collection of old (mostly B&W) films I wanted to transfer to DVD, and I spent several months shopping for a good DVD recorder. I at first tried the stand-alone units, which even once I got past the cable interference issues performed rather bleakly. Now, keep in mind these are the Wal-Mart units; I tried four different brands. I chose Wal-Mart mostly because of their liberal return policy. The most promising unit was actually the cheapest, the ilo model, mostly because it was hackable and their was a nice little community on the 'net for it. However, the tuner absoultely sucked, so it went back as well.
I finally decided on an RCA unit (DRC8310N). It goes for about $230 now at Wal-Mart, and the new boxes that are shipping now with newer software are even better than the previous version (though the model number has remained the same). The interface is slightly clunky at first blush, but once you figure out how it works it is simple and effective. And it makes GREAT looking DVDs. REALLY great. The picture quality rivals broadcast and, as I said before, the one-touch VHS transfers are of top notch quality.
As to why one would choose this over a 2nd TiVo, I use mine for the same reasons the OP wants it for. There are few conflicts in my TiVo world, only Lost/Veronica Mars, and the upcoming season of 24. Other times, I actually like having to make the choice, especially since I watch mostly syndicated and cable shows, which repeat so often I can almost always find a showing that fits into my To Do List. So I use my DVD recorder for those few shows, and anything I know I'm going to want a great archival copy of. For instance, when an important film is on TCM (say, 2-3 times a month) that I need for my collection, I record it directly (which is of higher quality than a TiVo recording even at Best).
I have some complex needs, but I really have met them with very little equipment : the RCA DVD recorder/VHS combo, my TiVo, and an old 1.0GHZ PC that I use as a TTG server that has an external DVD burner. With that, I am able to keep TV for casual watching around, TV I want for longer term access, and that which I want to make permanent in my collection. Ain't technology grand?