the reason i started a frag tank is to allow the little frags to grow out before i move them to the display. is it needed no, is it worth it, yes. i also use it to hold little frags from the display before a trade show or something.
mine consist of a 20g high tank, a HOB canister filter, heater, a powerhead, 2x65w PC lights, eggcrate, and some live rock. i also use a sand substrate, but only because i am also trying to breed a couple of types of worms in that tank as well. i really want to put a MH light on the tank as well. probably in the 175-250 watt range.