From the variety of replies it seems clear that the answer is “any and all ways that you like to work to make something you are happy with”… 
I love stereo recording and multi-tracking, but always do live performance takes. Others have said that straight to stereo is their choice… or recording patches and then using them in finished pieces…
In the end maybe the modular isn’t all that different than other instruments? Sometimes you can treat it as one instrument, sometimes as a whole ensemble-in-one. Live bands of all sorts often record straight to stereo… but others multi-track like crazy with single takes or lots of overdubs. Maybe we’re overcomplicating things? 
I love that we all do different things and treat it in different ways, so much to learn from each other and our approaches.
This is something I’ve heard from many improvisors (jazz, new music, experimental, etc). A lot of this music really lives in the performance, and the players play to perform more than to record. If you don’t live in a place with a modular community, maybe there’s an experimental music community?
I’ve heard my more serious music friends refer to forms of improvisation as spontaneous composition… As you say, there’s definitely a gradient between the extremes.
This paper has some good high-level points about where the two overlap and differ - http://music.arts.uci.edu/dobrian/CD.comp.improv.htm
In my music work I’ve tended to think about a session as the real-time performance. Sometimes it’s improvised, sometimes you can perform the same piece multiple times or in different ways/interpretations. The piece is what you’re playing, or in the case of improvised music it can be the document of the output. Unless you’re doing completely free improv then there’s probably some sort of “piece” that you’re performing…