Hi,
It's not required to use live rock for your setup, but it does have some great benefits like...
1. Great Biological Filtration (better than any commercial bio-filter).
2. It looks great! It closely resembles many fishes' natural habitat and my fish love to swim through the caves and pick the algae off the rocks.
3. I think it makes the aquarium more stable due to the excellent bacteria and different kinds of algae that come on it.
4. If you also use a deep sand bed seeded with live sand and your live rock on top, you can reduce your nitrates to almost zero once your tank is cycled.
The only downside to live rock is the price, but I do think it's well worth it.
As far as cycling with damsels, I would advise against it, especially if you buy live rock. When I started my 55 Gallon tank three months ago, I put in the substrate, then the water, turned on the filter and let it sit for about 6 days. After 6 days I put in a few cocktail shrimp from the grocery store and let them start to decay. Then a few days later I ordered 45 - 50lbs of live rock online and put it in all at once (removed shrimp). Even though it was 'mostly-cured' live rock, the ammonia spike was completely off the charts of my test kit. No fish could have survived through that spike! The plus side was that the live rock produced a great cycle and my tank was fully cycled (ammonia=0, nitrite=0, ph~8.2) in only two weeks. Then I slowly started to stock it and I haven't many problems yet at all. It's hard to wait and watch your empty tank for a few weeks, but to me it's much better than watching a fish die from ammonia poisining in my tank. I hate watching fish die, it drives me crazy having to watch it! And if you cycle without damsels, you also won't have to worry about getting them out of the tank after the cycle. Anyway, thats just my opinion but it seems to have worked well for me and a number of other users on this board.
Good luck, and welcome to the hobby and this board!
