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This step is not necessary. Drive can be released without removing the screws.
Yes, that belongs to the yellow screw and is (badly) glued to the motherboard. You'll need very thin pliers to place and fix the nut while reassembling.
I've changed some iPod screens as well and that has been the least pleasant experience so far. Glue and the main connector that has to be unwrapped and connected from the rear where you have no feel or control where it belongs.
iPhone repair is complex, but doable and has very few "traps".