"Can anyone shed light on this seemingly rare Vickers LMG? Was it provided only to armored car crews? Its use was clearly dependent upon the provision of a water chest, hardly an asset for an LMG."
Not really rare and not really a LMG.
from WW2 FACT FILES MACHINE GUNS (Peter Chamberlain and Terry Gander)(1974)
'.303" Vickers Tank Machine Guns
The Marks of the Vickers Machine Gun developed for use in AFVs were the 4B, 6, 6* and 7. The 4B and 6 entered service in 1934 and the other two after 1938. They were all very similar adaptations of the basic Vickers design, with the main change being that pistol grip and trigger were fitted in place of the usual spade grips. The water jacket was retained and connections provided on the Mark 6 for an internal header tank for coolant water. The mountings differed from mark to mark but they were all rather heavy, bulky and expensive. Most British AFVs carried a .303in machine gun between the wars and the gun served mainly as a co-axial gun on cruiser and heavy tanks and as the main armament of many light tanks and armoured cars. They were eventually replaced by the 7.92mm Besa guns.'
DATA (Mark 7)
Calibre 7.7mm 0.303 in
Length 1100mm 43.3 in
Barrel Length 790mm 31.1 in
Weight 21.4 kg 47.2l lb
M.V. 744 m/s 2440 ft/sec
Rate of Fire 45-500 rpm
Type of Feed 250 round fabric belt
Similar data can be found in MILITARY SMALL ARMS OF THE 20th CENTURY - 7th Edition (Ian V. Hogg and John S. Weeks)(2000)
Above photos from this site
"The Mk. VI, Mk. VI*, and Mk. VII Vickers MGs were the secondary armament for all Tanks in British Service until the gradual introduction of the Besa and Browning MGs in the early 1940s. This meant that they were being produced in line with the developments and demands of the Tank 'fleet'. As well as being produced from scratch, they were also being converted from Mk. I guns, either from guns that needed repair anyway or from new production stock. The majority of components were common to all guns in .303-inch."