Performance Tuning :: Handling NULL Values In The Database?

We have database with multiple fields containing NULL values and in many queries we have NVL function which in turn is suppressing the index usage when in fact it is really essential (selectying very few rows from massive data) instead of creating lot of Function based indexes (NVL) or composite indexes with (nullable_column, constant) I am thinking of settting a default value for most of the fields In that regard I have some queries :

Which approach is better - setting default value for the fields or updating the fields with default value and modyfing inserts to take care of future data? Though altering table and modifing column to set default value looks better considering it will take care of data inserted in the future, it will invalidate the subroutines.I understand in 10g both statement will generate lot of undo (though in 11g, I heard things changed for setting default value of a column) How to take care of all the queries which are using the criteria 'where column1 IS NULL' or 'where column1 IS NOT NULL'. It will be really difficult task to manually change each and every occurrence of such condition even using user_source.

Finally for numeric values say for ID field which starts from 1 onwards 2,3,4 etc, we can set 0 as sensible default so that the performance is not affected.

Is there such precaution for varchar2 field purely from performance point of view?