I would not recommend skimping too much. Our recommendation is to do the same preparation you would for seeding any other way, but in a situation where the weather hasn't co-operated and perhaps rains have caused some crusting, just go ahead and seed. Hydro seeding will produce great results under a wider range of circumstances and get a higher percentage of seed to germinate. You can use any seed at the same seeding rate you would if seeding any other way, seed doesn't need to be anything special for hydro seeding. You can use any turf fertilizer.
Most people use granular because it is less expensive.
Turbo Turf will handle granular fertilizer fine. It does not dissolve the granules, it suspends them and blends them evenly into the mix. We prefer paper mulch or Jet Spray. Paper mulch and wood mulch use a different technique in protecting the seed and sealing in the moisture. Paper mulch forms something like a thin layer of green paper machete.