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The only thing Valygar is needed for is opening the first door in the Planar Sphere. He's the key, in a very real sense. After it's open, you can drop him or use him, as you prefer. The door remains unlocked, afterwards.
I've heard that you can't get the Planar Sphere as your stronghold (if you're a mage) should you not have Valygar in your party, but that's wrong. I've played mages on three run-throughs, and everytime I dropped Valygar after opening that door. I always got the stronghold.
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