The paper is best paired with a bit of cheese, but is quite nice on its own. I may or may not be joking this time.....
I like my brisket a little south of what most folks here like, a little chew is not a bad thing imo. Not a lot of chew, but a little. Yours looks like it needed another 30-40 mins of heat (or maybe 5 hours - all briskets are different) but ain't no shame in what you turned out.
For #1, it looks pretty darn tasty. I'd much rather have one just a little under than over and mushy. The under ones can be chopped up fine and mixed with some fatty point and makes a dang tasty sandwich with just enough SBR's to help it hold together (cook it all together in the oven for half an hour or 45 mins). Only time I'd ever consider sauce on brisket- with burnt ends being the exception.
I know you have your heart set on chili but make a little stroganoff with some of it too. Trust me on that!