I must say Hogfather is one of my favourite books - pity I couldn't reread it soon enough.
On the subject of the Hogfather and if it is really necessary that people believe in him I'm with LilMaibe - and Terry explains it much the same way in the end of the book.
Without believe in such things the world would be very different indeed. As Death put it, you need to believe in the small lies in order to be able to believe the big ones like life, liberty and the pursuit of happiness (oh, wait, slipped into the wrong context here).
Imagine a purely logical race, such as the Auditors would like it. Would there be love? Surely not. And this is but one thing, there are many others. What about human rights? They're a "lie", too. We've made them up (and a good thing it was we did).
On with their heads! I'm the clown prince of fools
if you don't get the joke it's your loss
Love and laughter you see are the new currency
'cause greed's coinage is not worth a toss