I don't think its required anymore. And yes, W. Malaysians used to need passports to enter Sabah/Sarawak up to a few years ago. I think W. Msians still need a work permit to work there though. And yes, you can identify a Sabahan from his/her IC, there is a 'H' at the bottom right corner. Not sure what Sarawakians have but yea...

I think so. Though you might want to find out from someone else for sure. I'm a Sabahan myself, but my mom isn't and I remembered her always having line up at a separate queue at the immigration with a passport during our trips back to W.Msia when I was kid. But things may have changed since I moved to the Klang Valley six years ago.