Well, I love it when problems get worked out while I'm not looking! It does look like you were starting to run low on video memory there, so some trade-offs on cloud coverage or rendering settings would be necessary.
To answer your other questions, though - if you don't have RWC, SMP will honor X-Plane's real world weather or whatever other plugins may be sending in, but it will be limited to 3 layers of uniform cloud conditions surrounding you at all times. RWC is the only way for SMP to represent distinct weather systems that you can fly into and out of. Without RWC, all the clouds around you will change at once when you enter new weather conditions. If you like flying in real-world weather, it's worth it.