Reliability of mongodump
Is my understanding correct? Is there any value in --oplog option of
  mongodump utility?


As MongoDB Blog documentation here Ensures that mongodump creates a dump of the database that includes a partial oplog containing operations from the duration of the mongodump operation. This oplog produces an effective point-in-time snapshot of the state of a mongod instance. To restore to a specific point-in-time backup, use the output created with this option in conjunction with mongorestore --oplogReplay.
Without --oplog, if there are write operations during the dump operation, the dump will not reflect a single moment in time. Changes made to the database during the update process can affect the output of the backup.

--oplog has no effect when running mongodump against a mongos instance to dump the entire contents of a sharded cluster. However, you can use --oplog to dump individual shards.

--oplog only works against nodes that maintain an oplog. This includes all members of a replica set, as well as master nodes in master/slave replication deployments.

--oplog does not dump the oplog collection.


  I understand that the recommended way to backup MongoDB data is to use
  file system level tools. However, mongodump utility is promoted as a
  valid alternative for smaller instances, when file system snapshots
  are not available for some reason. Many resources recommend running it
  with --oplog option to enable point-in-time restores.


You could use oplog option if you are taking backups of all the DBs.

mongodump  --oplog --out /dump_location


Now while restoring do something like this :

mongorestore --oplogReplay


This way mongodump won't require a write lock. Any writes that are made during the backup process will be written to oplog.bson. While restoring, mongorestore will use this oplog to include the write operations.

For your further ref here, here and here