Im not sure if this a technical or a purchase question?
If you are deciding what to buy:
Chosing DWP Basic will not give you access to the dwp catalog so your catalog source will be SRM for example. This gives you limited features but you use the "new" GUI and get some new features.
Going with DWP Advanced still gives you the option to migrate your services at your own pace since you still can present what you already have in SRM either directly or by an easy import. To truly move your services you need the catalog. If you provide your BMC AM with your use case and requirements they will help.
You already bought DWP Advanced and the question is technical:
Yes, you need to install both. Your users access DWP which presents the catalog from DWPC where you manage your services. If you are upgrading to DWP i believe you can ask BMC for help within the AMIGO program (BMC AMIGO Program Overview - BMC Software). They will not do the actual upgrade but you could get some assistance in your planning from that program
Also, How about the Database for DWP ? I read from the document that DWP will be pointing to the existing AR/ITSM DB also the DWPC catalog and its components will need a separate DB storage ? Is that correct ??