It attaches to the bottom of the reed block plate, and then connects to the bellcrank just above it. If you check the steering section of the parts link in the top right corner of this page you will see a picture of where it attaches.
As for if you need it hooked up, that is personal preference.
The cable controls the low speed steering assist and can be very handy when docking the boat in wind or a current. My system is slightly different as it uses two permanent magnets and a magnetic switch to signal the ECM to raise the rpm when the steering is turned to the stop. The biggest complaint most people have with this set up is that they find it too sensitive, and it picks up the rpm when they do not want it to. When I went through my boat, I pulled the dash out and adjusted the distance between the magnets and the switch so I have to turn the steering wheel right to the lock, and then put just a "little" more pressure against the stop to close the switch. With it set this way it only kicks the rpm up when you want it to, and I couldn't imagine not having it. Adjust your cable so that it works in a similar fashion and I'm sure you'll be happy to have it.
Aaron:cheers: