I am assuming a Torch Height Controller is necessary to get the initial spark started.
No (because of your next statement). You just need to arrange your torch to be at "pierce height" above the work and fire the torch.
My plasma cutter has a pilot arc starter so I could ignite without touching the cutting surface.
there you go - that's why you can do the above
My torch has a detachable guide to keep the nozzle a consistent distance from the cutting surface. Couldn't I just build a holder for my torch and set my z axis to the required height and just leave it there?
You could indeed.
Do I still need a THC?
Depends on how good a cut you want and how often you're happy to renew your consumables and how long before you get fed up of the "drag tip" moving the metal and ruining your part
A THC will give you FAAAAAAR superior cut quality, save you lots of cash in consumables and allways keep your torch off the work and at the correct cutting height as it travels over the warped metal. Warped as in to start with and as the heat affects it. BUT for THC to work you also need IHS - see below.
How do I get Mach3 to pause for ignition before moving the x and y axis'?
write a gcode cut prolog. OR use a CAM (I like Sheetcam) to generate your gcode and you're done. It's not just pause for ignition. It's move to pierce height, fire torch, make sure arc is good, pause for pierce, lower to cut height, commence XY. The question is: where is pierce height? for this you need Initial Height Sensing (IHS). This is often done with a floating head and switch arrangement.
And the last part of my question which I don't think is a function of Mach3. Say I was cutting a 3" circle in thin steel stock. It only seems logical to me that the cutter not ignite on the perimeter of the circle but rather somewhere inside or outside of the circle to provide a really smooth cut transition. Could somebody tell me if this is an accurate statement and what this type of manipulation is called? Is it some type of offset? How do I implement it in say CamBam etc?
Correct - it's called leadin (there's also leadout) again it's a function of CAM.
Ian