Group, Type, or Membership type - please advise
I would start by reading the "Groups vs. Tags. vs. Custom Fields" wiki page, but most likely you can use any of the approaches you suggested successfully.  I personally don't use tags much when I only need to tag contacts; they can't be mailed to like groups, and they're not as neatly grouped as custom fields are.  So I'd consider groups, custom fields, or membership types.

My main question would be how you intend to keep your data fresh.  Are you syncing in any way with your external system?  If so, importing custom fields or membership types is easier than importing groups.  Memberships are compelling because you can have different statuses, which would mesh well with your "reduced status" grace period.  The format in which you can export your other system's data (or better yet, connect automatically via an API) would be the deciding factor for me in your situation.