Is it required to move on to further episode??
Converse with fellow players
It's not a requirement. If you're not equipped well enough, or if you're a casual player, you will have a hard time if you plan to beat this boss, and an even harder time if you plan to S rank. However, it's a good battle to learn as there's much harder solo endgame content, like Omega Masquerade, and XQ: Madness & Phantasms. For now, all you would get out of beating Phaleg's extra battle would be several SG titles.
No. It's content for good players aiming to get better. Not for casuals. No reason to run it at all.