I've had instances where I've added units to the game and not done sprites for them, and the game seems to use the 3d model at all distances. This occurred when there was no sprite line in descr_model_battle. The result wasn't great, as at max zoom-out the unit's men appeared to vibrate or shimmer slightly. I don't know whether this was due to my poor graphics card or just some weirdness caused by trying to display the 3d model too small. Once I made sprites for them they looked just fine.

The only advantage to not using the sprites was that men still had shields when you zoomed out. The sprite generator can't put shields on its models (or at least I've never been able to find out how), so they suddenly appear on the unit as you zoom in. This can be very noticeable and silly-looking with units like Nubian Infantry in vanilla. Disabling the sprite deals with this.