#1 - The script is spoken DIALOG between characters; that's AUDIO. Insuring that the audience can understand the dialog is just as important as the shots of the characters delivering the dialog. The smaller the budget the more you should put into your production sound in terms of budget and time.
#2 - The characters live in a world of sound as well as a world of sight.
#3 - If you have captured quality production sound you have the capability to be subtle with the sound design. Even a characters footsteps can tell you a lot about a characters emotional state. The ambient sound used can provide just as much about a characters environment as the visuals.
Diagetic vs. non-diagetic music will be determined by the script and the editing. It is not unusual for music to start a scene as diagetic (from the radio, for example) and then turn into the score (non-diagetic) as a bridge into the next scene.
Sound design is an art form just like cinematography, make-up/hair, set design, editing or any of the other crafts, and can greatly enhance a film if embraced during preproduction and not treated as a post-production afterthought.
Lose yourself in filmsound.org for a few days, especially the articles by Randy Thom and Walter Murch.
Also read "An open letter from your sound department."
http://filmsound.org/production-sound/openletter.htm
You should also check out my blogs on production sound here on IndieTalk.
