in short, yes.
when the marker shoots a paintball, vibrations travel down the entire length of the barrel. Over the course of time, these vibrations may be sufficient enough to loosen the barrel apart from itself or the marker. The purpose of the o-ring is to prevent the barrel from coming apart as a consequence of the afore-mentioned vibrations.
I took mine off when i sent in my barrel for lasering and havent replaced it since. My barrel hasnt suffered from the o-ring's removal.
The o-ring you have probably is slightly thicker (bottle o-ring perhaps?) than the factory stock one which is why it get more difficult to screw in. The default o-ring doesnt have this problem - it's relatively easy to screw together the 2-piece barrel whilst simultaneously providing a secure grip between the threading.