First a clarification from the ITU:
G013. What is meant by ISM applications and how are the related frequencies used?
The term "unregulated frequencies" is not used within ITU texts. What is often meant by the term "unregulated frequencies" is the frequency bands for industrial, scientific and medical (ISM) applications.
Europe doesn't use the 900 MHz band, but 868 MHz (the full ISM band is 863 to 870 Mhz).
(source)
Note that some sources will refer to 868 MHz as ISM, while other will refer to the more general SRD (Short Range Device).
Further reading
ISM-Band and Short Range Device Regulatory Compliance Overview
I don't understand what is happening on this diagram.
Referring to the diagram in OP.
This MOSFET-TRANSISTOR duo is used to enable and disable the power supply of the module, when MCU_CTRL is high Q101 is enable, which in turn enables the Q102 by pulling the GATE of the PMOS Q102 to GND, and enable the power for module on VBAT pin. When MCU_CTRL is low, in similar fashion it disable the power in VBAT pin.
For one thing, the part I was most worried about, the capacitor, seems not to be listed. The description of the diagram states that "A low ESR tantalum capacitor is usually used. The value for the capacitor should be more than 470uF."
The datasheet of SIM900 suggest low ESR 100uF capacitor(tantalum will be good) with a small 0.1uF or 1uF ceramic in parallel placed close to the SIM900, on page 20 of datasheet.
It also says that "When there was no on/off pin in the LDO or DC-DC IC, the customer can follow nether reference schematic to control the VBAT on/off." which seems to imply this doesn't actually show all of what goes into the VBAT and there's more to the circuit outside the VBAT_IN.
This particular section in the datasheet gives you an option to enable/disable the power supply of SIM900 using the MOSFET-TRANSISTOR duo if in case there is no ON/OFF pin present on the DC-DC converter or LDO. So either optios you can use to enable/disable the power supply of SIM900. But the datasheet of SIM900 shows it has got PWRKEY which is default pulled-up to enable or disable the power supply. Ref: Datasheet page 17.
I'm also confused as to what the MCU_CTRL is
The MCU_CTRL is external pin coming out from the master controller/processor, not coming from SIM900 to enable/disable the power supply.
In the starting of the OP, it disusses about powering the SIM900 using RBBB arduino which can supply a maximum of 250mA to 300mA which is using L4931 LDO.
But I am afraid it is not the correct approach to power SIM900, since the datasheet clearly expects to power SIM900 using LDO or DC-DC Converter which is capable of 2A current, with a minimum voltage of 3.4V. Ref: Datasheet page 20
Best Answer
My short answer is that there is no better or worse, it is a generic answer "that depends"
It is true that you will have a larger coverage with the lower frequency (assuming, the TX power is fixed). GSM is a cellular network which means that it consists of multiple small networks (cells) formed by BTSs (base transceiver station) which has an ability to serve maximum number of users. More dense areas (city centre, shopping malls, etc.) it is desired to have smaller cells (means smaller coverage) to be able to serve more users to provide a better performance (higher frequency, lower TX power of BTS). If it is a rural area, GSM operators may want to have a larger coverage to decrease their costs. Therefore, larger coverage does not mean that it is better or worse, it depends on where and why it is applied.
GSM900 has 4 power classes (39dBM to 29dBM) and GSM1800 has 3 power classes (30dBM to 36dBM). Transmit power of the mobile platforms are adaptive, closer to the BTS, lower TX power. If you have noticed it, the uplink of mobile devices are designated on lower frequency than the downlink in order to lower the power consumption on the mobile devices.
Higher frequency allows higher data-rate and most of all, it allows smaller antenna size which is important for the mobile platforms and easier to hide BTS's antennas in the public domains.