Say someone was to launch an ICO on the ethereum network. The token created, would that be better as an 'IOU' until I make a cryptocurrency to replace this one (due to ETH fees), or would it be capable of being a standalone crypto with its own wallet etc? Apologies if this seems ambiguous.
An ERC20 Token is capable of being the real thing.
There is a great deal of latitude for the token creator. The standard defines an interface for common activities such as sending amounts and moving to an exchange while saying little about internal workings (e.g. total supply). The standard interface simplifies third party support.
Here's a list of ERC20-compatible tokens. By definition, they support the ERC20 interface.
Hope it helps.