John, this is actually a very good question that I walk through with every new client. To answer your question, it is a matter of either adding demand vs. reducing capacity. Editing the resource calendar reduces resource capacity. That can be done by reducing resource max units and/or entering calendar exceptions. Otherwise you add demand by using separate projects. Take that against your needs for resource utilization management. Max Units and calendar exceptions work better for the Project Manager and the ability to assign/move work around in the project schedule. That method also works for resource utilization management. Separate demand projects can also be used to manage resource utilization if resources if not using calendars.
One out of the box thought. Have you thought of using timesheets ONLY for OOO entries? Entering time to a non-work administrative category will enter an exception in the resources calendar. That plus reducing Max Units for administrative time can come pretty close.
Lots of options with pros and cons to all of them. Hopefully this will give you a start on evaluating some of them.