Nope, you don't need to have it make a waterfall effect. The skimmer will aerate it just fine.
Get rid of the HOB filter - they are old and considered more or less obsolete. Having a good quantity of live rock and sand will provide adequate filtration provided you have good flow - I'd definitely recommend getting another powerhead to really move the water around. The goal is to try to keep stuff in suspension long enough to get picked up by the skimmer and not to let it settle to the ground and rot.
A good skimmer is a great place to start, and a bad place to try to skimp on money too much. That being said, the Octopus brand isn't bad, and is a lot of bang for the buck.