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Is it possible to use TCP-only?

WireGuard is UDP only. For TCP or SSL tunneling, look at a million other things that already do this.

(I don't know much about networking.)

What are the advantages of doing UDP instead of IP?

It seems like, all else being equal, doing IP has the advantage of working with UDP and TCP out of the box.

It transfers general IP packets, but encapsulates them inside UDP packets.

UDP (and TCP) are built on top of IP. You can add other things on top of IP also, but they will be blocked by your average firewall.