User profiles must be created initially from an LDAP (or other approved directory) this does not include SQL. You have to have a domain account to match the Profile to. This can also happen when a user hits a SharePoint site for the first time.
Once the Profile is created you can update it in a number of different ways. If you want to use a SQL data source your best bet is to create a BCS connection to the data and then map the data to the profile in the User Profile Service.
To answer your other questions, if you are importing profiles from AD you must grant permissions for the sync to perform an incremental import. (BTW, this permission is the same permission required by other DCs that are keeping each other in sync.) The Farm account needs local admin ONLY while you are provisioning the User Profile Sync Service and Connections, once done you can remove the account from Local Admins. The account is used to write files, folders and other setting during provisioning.