Using the factory selector switch for forward and reverse is the easiest way to get running quickly, but you might want to install something like push buttons to start and stop the motor instead of using the factory switch. If you had a power failure, or tripped the vfd, it will start running again when power is restored if the run switch is left in the forward or reverse position. With push buttons, you can program it for three wire control so that if power is interrupted, you need to press start again to get the machine running instead of it running on its own. I had the Jet version of that lathe and the selector switch always made me nervous that I would forget to turn it off during a power failure or if I tripped a breaker, so since you are installing a VFD, that is a great time to eliminate that possibility. I did that for my mill that had a direction switch like your lathe has.
Another thing that would be useful is an emergency stop, lathes can be dangerous, so having a button you can hit quickly to immediately stop operation is highly recommended. That can be wired directly into the vfd so that it won’t run unless it sees the proper signal. The manual of your vfd should have info on how to wire that and program the vfd.
Some VFDs have removable control keypads, so you could install that on your machine and operate it that way, you would need to run the appropriate cable back to the VFD. That would give you control you will want without having to build a pushbutton panel.