I think my answers going to be a little different from other peoples because a) I have psychics in my stories who occasionally think direct thoughts at others or read direct thoughts, & b) one of my main characters does not think in sentences, but does not speak his mind either.
So sometimes I have direct thoughts to show that one psychic character is getting the information in a situation where another could not speak it aloud. And for my current MC, <rolls eyes> almost anything from him that is not an action is an indirect thought or a feeling. But he assimilates information the same, so he still could see a cop looking at his ID. But if the cop tells him he's too young to be driving, Jian's going to freak out & think about what to do.
I also separate what is psychically thought or "heard" & what is just directly thought. Here's an example that encompasses all three:
*You know, a little warning would be nice before you get all hot and heavy with Tenshi-kun next time* Mi-chan reminded her sister silently so their mom couldn't hear.
Neko blushed. It was times like this that she wished she had a mind shield of some kind. *It's not fair. Mi-chan developed one. Why can't I?*
Beyond psychics, I use a direct thought (which I put in the asterisks, instead of italicizing) when I want the thought to be in that person's voice as if they were speaking it.
*You've got to be kidding me!* she thought, not daring to speak out loud for fear of hurting her sister's feelings *Why the hell did she invite him?!*
To me that sounds better than:
"Mi-chan thought that Neko must be kidding. Why would she invite Mi-chan's least favorite person in the world?! If only it wouldn't hurt Neko's feelings so much to make a fuss about it."
Then there's thoughts, but not directly quoted. So, I'll use Jian 'cuz he's easy to find examples for. Here's one that integrates action, dialogue, & thought. So you can say whether it slows the story down.
It was Michiko! She had come to say goodbye after all!
With a sob, he ran into her outstretched arms, embracing her with all his might. “Baka!” she scolded him. “I wouldn’t just let you go like that.”
Jian was glad she could read his mind so she’d know how much it meant to him that she had come. He had been devastated by the thought of leaving while Michiko was angry at him. But now he could go in peace with Michiko’s support and blessing, even if she couldn’t come herself.
“Don’t be so dense, Jian. I’m not here to say goodbye.”
He let go and took a step back, searching her face for an explanation. What was she talking about?
Michiko grabbed onto his arm and whispered urgently, “Just go along with whatever I say,” just as their family joined them.
So I think for your last question, I'd say just integrate into the story. Because I consider thoughts & emotions to be important to the scene, I never think of it as getting in the way. Jian's a little special, I guess, since his thoughts occasionally serve as dialogue when he's with Michiko, but they also are what he's feeling. Michiko & the others all have those kind of thoughts too, as well as direct thoughts, & I never think about whether it's getting in the way. A lot of times it's a good way to get info out without seeming too info dumpy.
I guess the real difference between direct & indirect is how I imagine the thoughts go through their mind. For Jian, everything is more of a sense of a thought rather than a direct thought. If those questions were being asked in the mind of any other character, they might be direct, but I, the writer, know that they're not direct thoughts, so I don't write them as such.
Yeah, so what it comes down to is whether the character is actually thinking the specific sentence you want to write for them. Sue might think she's in trouble with the cop. Or she might think *Oh, god! Here comes trouble.* (Either way, she probably doesn't want to say it in front of the cop) It's just a matter of how you want the thought to come out. But if she thinks she's in trouble, you probably ought to let your audience know in some way. That's not going to get in the way of your story. And it's much more direct, (whether it's her direct thought or just a sense of what she's thinking) than showing it with her actions & hoping that the audience gets it.
Yeah, so that was a really long version of my answer to your question. No wonder I have trouble w/ my novel being too long