Slopey:
The 650 hours study time is the minimum requirement for the completion of an ATPL course, be it residential or distance learning. A percentage of residential time on a distance learning course is mandatory and for the ATPL this means about four weeks "in house".
A well constructed distance-learning course means that you will complete the necessary amount of study time at home. Remember that your service provider must countersign your examination application form stating that you have fulfilled the study requirements.
A CPL is a VFR only licence. To do a CPL course and subsequently add an IR is the expensive route because you will be doing two courses. My advice is to do the ATPL course, at the end of which you will be issued with a CPL/"frozen" ATPL. This may then be "unfrozen" when you have 1500 hours.
I have been in the groundschool teaching environment for fifteen years and, as always, suggest that if you have any questions on the best route to take, consult your service provider (or potential service provider).
A school will have all the answers at their fingertips (or should have).
JP