I would personally replace it. However I've read here that some people have done with out it (possibly on those lovely long straight desert roads in the US?). The rear anti-sway / roll bar isn't doing 1/20th of the work the front one does...
(I'm not sure if you're interested in this - I don't mean to be teaching you to suck eggs but there's this link that might be worth looking at
http://en.wikipedia.org/wiki/Sway_bar)
I assume that the screeching noise is coming from metal on metal contact - anti-roll bar / or end of rubbing on the axle. I don't know if that is true though - it looks like it from your pictures but this way of diagnosing stuff is a bit limited...
...that's why I want to encourage you to remove the wheel and look critically at the rest of the car / structure / suspension etc in that area. There could be something else wrong (I hope not - but it is best to check).