As you have been told, preserving in oil is tricky because of the need to prevent botulism development - the Food Standards Agency do not recommend us to do it "at home", in fact...
http://www.food.gov.uk/multimedia/pdfs/Acm562.pdf
I am sure, however, than thousands of people do it and, thankfully, botulism poisoning is still very rare. Making it for yourself is one thing, but selling it is another - you have to eliminate the risks.
The botulinum spores would be on the fresh chillis, so, yes, dried ones are better. The spores can't reproduce in acid conditions, so, again, yes, vinegar is another safeguard. I understand that these this is even more important than heating the oil. As for the consumer, we are advised to store the oil in the fridge and use it quickly. You have to be aware that not everyone follows these instructions, however!
I hope I am not teaching my grandmother to suck eggs - you may well already know the potential problems, but this information may be of use to others.
How about contacting the Food Safety team in you local Environmental Health department - they will be able to point in the direction of the latest information. They police our farmers' market, and have been really helpful to a lot of producers.