I don't think the # is needed but I could be wrong.No, it's not necessary, but gets through the prompts faster that way instead of waiting to timeout after input is finished.
I also want to reiterate that setting up a contact like this will expose your password to any app that accesses your contact data.
The more I figure out on this thing, the less I like the way that applications have full access to so much of the data internal to the Droid X. Seems like security is out the window for the sake of cross-application data availability - and with applications accessing the internet freely...just seems a little too "Open" for me. :-/