On standalone projects, is reset switch necessary? Is there any difference between power recycle and reset?
That depends more on the project than on an actual need. You need, however, to keep the RESET pin high all the time, so you have to take that in consideration. As a rule of thumb it is a good idea to protect the reset pin with a 10K resistor + a diode (a 1N4148 will do). Check the UNO R3's schematic here: http://arduino.cc/en/uploads/Main/Arduino_Uno_Rev3-schematic.pdf
If you want to be able to reset your standalone board, then all that will be missing is the button (taking RESET to GND). I find a good idea to be able to reset my standalone projects.
I am currently working on a standalone project and the board has only 1 serial port for the bluetooth dongle (4-pin header), 1 buzzer, 1 socket for a LDR that will be 50cm away and a 7-pin header for the daughterboards holding LED matrices. Neverthless, I added a reset button to the board, a voltage regulator (LM7805), a 6-pin header for serial programming using a FTDI adapter, and a ICSP header. This little board will be in my car, powered by the car's cigarette lighter.