Adding vinegar 'to the chicken' might give it a slight tanginess, but its certainly going to cause issues with the batter adhesion. Sounds like a bad recipe (especially if your batter was just flour and water too!).
Every time I've seen vinegar in batter dipped chicken, its because there's also baking soda and it helps produce a lighter, airier batter. And you put it in the batter, not on the chicken.
Deep frying is certainly an easier way to get things crispy, but there are things you can do to get crispy batter without it.
First off is the bread crumbs. Ideally the bread should be relatively stale and therefore dry. If you blitz your own breadcrumbs, leave them out for a few hours to thoroughly dry out before you pane. You can also try using panko, which are pre-packed Japanese breadcrumbs that are very crispy. You can usually find them in supermarkets these days.
The other thing you can do is double-crumb the chicken, so flour, egg, breadcrumbs, egg, breadcrumbs. This double layer of crumb should make for a really crunchy crust.
Finally, you can pseudo-deep fry using a wok. Rather than a full pan of hot oil, just put an inch of oil in a wok and fry in that: safer and less waste. A good way of knowing when the oil is hot enough is to use a wooden chopstick. Simply put the tip into the oil and if bubbles immediately gather around it, the oil's hot enough.
Set your oven to about 120 degrees F/50 degrees C, pop a plate with some kitchen paper on it in there, and fry in batches, placing the chicken on the plate while do you the rest.
If you use this method, you could try a tempura style batter. Take 100ml of chilled soda water and mix with 140g of self-raising flour and mix well. Dust your chicken with cornflour (cornstarch), then into the batter and straight into the oil. Turn a few times to ensure even cooking - when the batter is a nice golden brown it should be done, about 5-6 minutes.
Best Answer
When deep frying, there is no way to avoid residue collecting at the bottom of your pot. You can shake off excess flour before frying to reduce this effect, but you will always have some residue. The main difference between deep frying in a pot on a stove, and a dedicated, restaurant-style deep fryer is that the restaurant-style fryer is deep, and has the heating element well off the bottom. That produces a cold zone where debris collects, but does not burn. It is the burning bits that are left over that cause the biggest degradation of your frying oil. Restaurant-style fryers allow oil to be reused for quite some time, then filtered and used further. Depending on the amount of debris, the length of time you are using, and, most importantly your temperatures, you can filter and reuse oil from your home set-up, but probably not more than once or twice. If it begins to smell "fishy" you've gone beyond the opportunity to reuse.
Your new comment suggests that you are shallow frying. In this case I would suggest not reusing the oil. Temperature control is difficult at best, and the ratio of oil to chicken means that it will likely be quite degraded by the time you are finished.