How do you know when to use fondant decorations vs gumpaste?

Fondant alone would be good to use in cut outs on the cakes, borders, anything that you may want to stay on the softer side.

Fondant/gumpaste blend is used for decorations that you need to hold some shape, think drapes.

Gumpaste dries harder and faster, so it is great for flowers and other things that you need to set up fast to hold their shape. But you probably wouldn't want to stick it on the side of the cake, because it will be hard and crunchy.

You can use fondant/gumpaste blend and gumpaste for bows or modeling figures, the difference would be in how fast they dry.

I generally use only fondant, as TexasSugar said, when I want the piece to remain soft. I'll mix fondant with a little gumpaste if I want the piece to eventually dry, but need a longer time to work with it/manipulate it. I use straight gumpaste, or fondant with tylose added, when I need a piece to set up quickly or dry very hard. HTH!

Thank You.