I am also running the VG-99 stereo out (the sub outs, which aren't affected by the volume knob) to Input 2 (FX loop return) on the Axe-FX II, and the regular guitar pickups to the Axe-FX front input. I found there was some sound quality issues going with the regular pickups through the 13-pin and the VG-99, so I'm using 2 cables from my guitar to each respective unit. I also run MIDI from the Axe-FX to the VG-99 so the Axe-FX can control the VG-99 for program changes, controllers, etc.
I use the VG-99 in two ways -- as a virtual guitar, and as a "full unit" for certain sounds. For virtual guitar, I have specific patches setup for different guitars (Strat, Tele, Danelectro, etc) that are matched up to Axe-FX presets, so when I switch to a preset the guitar I need is also loaded up on the VG-99. I run the levels fairly hot out of the VG-99 and crank the input low, including the FX Loop -- I have it down to -30dB on some patches. (Better S/N ratio this way.) It helps to eyeball your input levels of your virtual guitar with your actual guitar pickup input; your virtual guitar signal should be in the same ballpark.
The FX Loop is put at the front of the AxeFX chain and is wired into the signal path within the first couple of blocks. It is possible to even setup the FX Loop with Bypass Thru so when it's off, the normal guitar signal passes through the block, and when it's on the VG-99 guitar signal goes through instead. Assign a footswitch to FX Loop bypass and you now have a switch between your normal guitar and your Vg-99 virtual guitar.
For the other stuff on the VG-99, I take the FX loop output and run it pretty much straight to the output, or somewhere towards the end of the chain (like into the AxeFX reverb block).
I've found that running a dual-mono setup works well with this arrangement, where the left channel is used for "normal" electric guitar sounds and the right channel handles acoustic guitar, sitar, synths, and other non-traditional sounds that the VG-99 puts out. That hopefully makes it easier for the sound guy to deal with the different sounds... makes it easier for me anyway when I'm mixing down rehearsal recordings. Just think of it as 2 instruments in the mix.
The dual-mono routing also enables you to use the VG-99 in both "virtual guitar" mode and "full Monty" mode at the same time. Run your virtual guitar hard left and the other stuff hard right, and make sure your drive/amp/etc blocks are taking left input only; your guitar signal chain will get only the virtual guitar signal. For the other stuff, just run that through a Vol/Pan block so you're only running the right channel through its own signal path.