I have a different take on the need for sleep.
The hippocampus/EC structures are tuned for one-shot episodic memory; the cortex is tuned for slower Hebbian learning.
The difference between these two methods is capacity; the hippocampus can hold about one days worth of memories and the rest of the cortex can hold vastly more. Obviously - evolution has tuned the hippocampus capacity to our daily cycle.
When the hippocampus is full it causes negative effects like hallucinations and is painful to the point where sleep deprivation is used as a form of torture.
One of the optimizations of the hippocampus is that the contents are specific to the most recent events. This means that these contents can be “colored” by the limbic system with the outcomes of the events. I believe that this is where experienced events are given personal relevance, both good and bad. The known connections between the hippocampus and limbic system support this narrative.
During sleep the contents of the hippocampus are used to reinforce the experience of the day. Since the connections are 1:1 with the rest of the cortex a delta in contents would be the the same as highlighting information that has to be “transferred” to the cortex. Multiple presentations of the newly learned contents (with emotional learning mixed in) of the hippocampus would be imposed on the cortex to develop and reinforce long term memory. The well known “spindle” waveform is a form of readout of this difference and are the driving force in this transfer. When the two systems have “equalized” transfer of learning is complete.