How should I configure mySQL 5.7 on Ubuntu for a physical Hot Backup?
Use Innodb unless you have a specific reason not to. If your coming from Oracle you will find its internal behaviour familiar therefore learning curve is shorter. 

For what you described you probably will want to enable binary logs (check which format suits your use case better: row, statement or mixed).

For hot backups I recommend to use percona-xtrabackup. It can stream data directly to a remote server so you don't even have to have double the free space available on the backup host. The documentation is very good and detailed and you can also find many source online. 

I hope this helps getting you started. Good luck!