I would like to know if the Save Incoming Media feature in Whatsapp create duplicates i.e. saved in both Whatsapp application data and also Camera roll?
Yes, it does duplicate media in the sense you describe. With that switch activated, all incoming images will have 2 copies: one on the app and one on the Camera Roll.
To answer your comment, not so much the ability to auto-delete, but switching it off prevents it from being copied to Camera Roll - you'll have to manually delete the message in order to delete the media.