When to use taxonomy vs content type?
Content type defines kind of information, different content types means different structure and different nature of content. Taxonomy is for categorisation. They can be interchangeable to some extent, but it's really up to how you want your data defined.

If all nodes we are talking about perform the same function in the system and are supposed to have the same fields, keep them categorised by taxonomy. If their function should be different, make content types - it does not mean you need to give up taxonomy then (but you may if it's no longer needed).