To answer the title of your thread, If you go read the CSDM white paper, it has a pretty good definition of a business application in the ServiceNow context. They've refined it over the years to where I'd call it a pretty good definition in the sense that most architects wouldn't balk at it in a general context, most architects seem to debate definitions like this.
Like you, our services nearly one for one reflected the business application names in iteration one. However, over time we realized that certain supporting applications were actually just supporting application services to an actual business application. At that point we might choose to stop tracking it as a business application and just call it a service which enabled the larger business application. The key test on that was to ask ourselves if we'd continue to use the enabler if we lost the business application. If the answer was no, then it was just a component of the larger investment.
As for best practices. I'm not sure there are hard and fast rules. The blue area of the CSDM is design. How do you want to design and track your business? I think a best practice would be to keep it simple to start. Another would be to iterate it. If I were you I might look at how other non-ServiceNow methodologies design and track an architecture. For instance we worked with research groups who brought us methodologies in the past. They very much resemble what ServiceNow provides, likely because ServiceNow pays attention to industry standards.
