yes you need to have tws open at the same time for the api to work ... a little strange but I guess it was eaiser for them to use tws as a conduit rather than allow the api to make calls directly to the server.
IBs forex offering (ideal pro) is actually pretty good. The range of xrates is decent and the spreads are competetive. I haven't seen what they're like during fast markets yet though. I only use smartquant fo the built in indicator and the graphs, less hasle for me to write my own charting plugin.
You might also want to check out
www.efxgroup.com. The liquidity is supposedly extermely high with up to 10 large market makers providing liquidity. Furthemore, they don't trade against their clients and also as they are ib for mbtrading, there will soon be api right down to fix level