Does Google really need a sitemap to index ALL my site? (over 5000 pages) right now I use the free version of XML-Sitemaps.com which lists only a maximum of 500 pages, does that mean that Google will not crawl the remaining 4500+ pages?
No, you don't need to submit a sitemap to google for them to index all your pages. They will index all of your pages if your site has a proper linking structure (ie all of the pages can be navigated to via links from your homepage or other pages that your homepage links to), or if other websites already indexed link to your pages.
Why google need xml sitemap? If you are not interested to create xml sitemap then there is no problem, your website will be crawled as google find your website and website pages. XML Sitemap:- google xml sitemap is very important to crawl your website's all pages. xml sitemap offers short and collected information for your website. XML is soft coded and easily accessible language. you can listed up to 50, 000 webpages in one xml but it should be less then 10 Mb in size.
it is not mentioned anywhere to be submitted mandatory, but yes it definitely helps google to find your pages easily and index them comparatively faster. i always do that if i add more pages or delete any of them from server.
It never does mean so. Google look for links, if your all pages are linked anywhere on indexed page then they will be crawled. If you want to make a sitemap including all of your pages then use advance xml-sitemaps service.
Yes its give an easy access for spiders to crawl the entire website. But i think don't worry if you update your website and tends to add more pages with fresh content there. Google will crawl it fast
You will get faster indexing if your XML sitemap contains all your URLs. But you will probably get most indexed either way, it'll just take longer.
yes you are right XML-Sitemaps.com lists only a maximum of 500 pages but it does not mean that google will not crawl remaining 4500 pages, I have one more link which may help you and it will create more XML sitemap for more than 500 pages. http://www.microsystools.com/products/sitemap-generator/