The file is not essential, however, it is necessar for Vista Search WDS to opperate.
There were a number of problems with searchindexer.exe that were fixed in the RTW version of WDS 3.0. If you are using a beta version of WDS I would strongly suggest upgrading.
Similarly, a number of issues were fixed with searchindexer in Vista. I would bet any problems you are experiencing will be addressed by the upcoming RTM.
So...if you want to use the instant search features of 3.0 or Vista - you need to keep searchindexer.exe. If you don't care about those features you can disable Windows Search in Vista or uninstall WDS.
Hopefully you'll simply decide to upgrade to 3.0 RTW or Vista RTM (as soon as it's available).
Paul Nystrom - MSFT