1Password 8 Setup best practices?

Technically, vaults are for access control. If you have multiple people with different access requirements, sort the items with the same access requirements into the same vault, then give the people access according to their requirements.

You did it right if you never duplicate items into multiple vaults. If you need different access to an item, move it to a vault where this type of access is granted but don't duplicate it into multiple vaults. If such a vault doesn't exist, and you cannot change an existing vault, create a new vault.

Me, I have a family account with my father. All of my items are in my personal vault except about 5 items in a shared vault we use together. A simple but sufficient setup. He also have his personal vault where he stores all of his items. I try to make the most simple setup as possible everywhere to avoid confusion from complexity. Confusion starts if you accidentally save a login as new item instead of just updating an existing login, and if the new item gets into a different vault. This is something to avoid, so the less vaults the better.

The family name in the desktop app is indicating your current scope of available vaults. If the family is displayed, you "see" all your available vaults from the account. If there are vaults you don't want to see all the time, create a collection. In a collection, you can select vaults, so you can exclude vaults from your current view. If you change your view to a collection, its name is displayed instead of the family name.