To me the main purpose of a ground sheet is to protect your sleeping system against abrasion and keep things clean. So, it is a requirement.
Regarding ground moisture. If the ground is sandy, water usually drains well and quickly. However, there are many areas that do not drain well. Look at the picture below, this terrain can get real mushy in a rain.
It looks sandy, but is mostly rock, with some sand. It was very difficult to find a spot big enough that would be comfortable with just a torso sized foam pad.
Insects rarely bother me. But when hiking in deserts that are subject to monsoons in the summer, the flying insects can get as bad as anywhere. A good example would be the high desert in southern AZ in August.
Last item is flash floods. I take the possibility very seriously, and they can happen in an area that is not raining, but somewhere off in the distance. I was fortunate/unfortunate to be hiking during two 100 year floods about 30 years ago. I was safe, and to view the power of a major flash flood up close and personal was mind-boggling, but the damage was devasting to Palm Springs and later Palm Desert. During the first one, I was unable to drive home for several days, as the roads into Palm Springs were impassable. My car was okay where it was parked, but I could not drive on the roads. Fortunately I had water in the car. Nowaday's I always leave a case of bottled water in my vehicle.