Several sites I've visited mention that I need to revert to the stock firmware and possibly wipe my phone data before installing a custom ROM. Is this recommended or completely necessary? I have a Samsung Captivate (Galaxy-S), running Froyo 2.2 (installed via Kies). My phone is rooted. In case it matters, I have Windows XP.
It's not always necessary, but always a good idea. There are custom ROMs that change the partitions of the phone storage, and some flashing methods don't reset the partitions. What ends up happening is that the update can't be written properly -- it either fails, or files and firmware end up in the wrong place and the phone can't boot. In some cases, this can brick the phone.
With a Galaxy S, the best way to ensure this doesn't happen is to revert to stock firmware, wipe everything, and then use Odin to flash an Odin-compatible ROM with the "re-partition" option checked. My answer here has some more info on Odin (just be careful not to use the firmware I linked to, since it's for the GT-i9000 and not the Captivate).