The stitch-assist mode on my old Canon S30 did two things, it helped line up shots exactly in the viewfinder, to get more-or-less perfect coverage (doesn't necessarily help with drift up or down, though), and it also named the resultant images files with a letter postfix (_A, _B, etc.) so that the Canon Photostitch software could automatically recognize a group of images that should be stitched together, and place them in order.
IIRC, the Canon P&Ses let you use as many shots as you want in a single row or column, or a four-around pattern. And you can actually cover 360 degrees and make a QuickTimeVR with Photostitch as well. I do remember having problems in Photostitch, though, if I tried to shoot 360 around in portrait mode, or swapped around the orientation of the camera, or tried to do multiple shots. At that point, I needed to find a more sophisticated stitcher (Autostitch, Hugin, PTGui, etc. etc. etc. Actually, I use PTMac and Calico, but I'm weird). They may have updated it since then, but since I went to PTMac, I haven't really looked at Photostitch.
And no, you don't need stitch-assist mode to make panos. But there are times I wish I had it on my XT.
Sometimes my guesstimation on coverage can be a wee bit off:
Canon XT. Sigma 8mm Circular Fisheye. Four handheld portrait shots at not
quite 90-degrees.
If you're interested in 360x180 panos and
QTVR cubics, you want the
panoguide board.