Has anyone got any experience of using pkgsrc where the application
  source code for each package is in the same repository as the pkgsrc
  infrastructure, rather than being downloaded?

See pktools/pkg_chk.  The source is in files/ and 'extract' would copy
them into work (except this package doesn't need that).

Having work checked in seems very awkward, especially because it can
often be someplace else via WRKOBJ.