(Hey Brew ... How's that Massive-Mod coming along?)
You've described the purpose. It is to stop a Quest becoming uncompletable because the PC loses the item required ... Like actors, who can be protected so that they don't die and make completion of quests impossible.
So, you have a choice ... make it required (by tagging as Quest Item), or don't ... If you don't, then you let the player choose, but you also need some way to tell the player that the Ancient Book of Power Spells is a required item to complete your quest
As for turning off when Quest is complete ... You need to think about how the item is being used ... You can remove a no-drop item by SCRIPT, so you could have the completion-stage of your quest do just that (if not the stage when the item is actually used ... Easy example: Need KeyA to Open DoorB ... when Door-B opened remove Key from PC via script ... but does the door remain unlocked forever? Better to leave key deletion until Quest complete?)
It's your choice as a modder ...