Pronunciation is no longer “folks wagen” but “faults wagen”. The classic German ironic sense of humor.
But, yeah, I've owned several VWs and electrical wiring is usually faulty so I'll go with Faultswagen as well.
Is that the correction pronunciation now?
Not really, it would be pronounced like the v in Vincent, not Wincent.
Are there proper German words that don't read V as F? I've been lead to believe German is strict with phonem/letter combination.
If I am reading Duden right, Version is directly a French loanword:
https://www.duden.de/rechtschreibung/Version
while Variation is "influenced" by French:
But they must have known that people won't know that, so you still have a valid point.