Yes cycle it. Any ammonia in the tank is going to pwn those corals you add. A 55 gallon is a good choice for a frag tank IMO. Its a good size. I have 4 65 watt pcs over mine... im dying to upgrade to 4 96 watt pcs over it.. the price for that setup is around 500 bucks though.
Metal halide is better if you can get it, but its not necessary. If your frag tank is anything like mine.. you're not in a horrible rush for things to grow. I place mine in the tank and leave them.. when it looks like its time to trade them in.. then I do so.
So far i've probably got $300-$400 store credit for my frags (I havent done it long or fragged much). I get too lazy to frag sometimes... it becomes a chore