I'm almost positive that ETFs or individual stocks reinvest. There is an option to select for each investment on whether to reinvest dividends.
I still have a few individual stocks, and I just consolidated them to Vanguard. It defaulted to reinvesting dividends, so I have things like 20.37 shares of various individual stocks before I noticed it and had them just roll into cash
I think you'd be fine buying VTI and turning on reinvested dividends. Even if you could only do whole shares (which I don't think is true), there is no fee for trading vanguard funds or ETFs, so you could just roll it in once a year, or whatever made sense.
Even if you get $3000, you're better off with VTI (ETF) than VTSMX (investor class shares) because VTI has an expense ratio of .04 vs .15 for VTSMX. VTSAX (admiral shares) also have an expense ratio of .04
I'm don't know about the $20 fee for accounts under a certain balance