Do I have to do a dist-upgrade at some point to stay with testing?
    

You should be doing dist-upgrades at least once in a while if you're
tracking testing or unstable. I do upgrade and dist-upgrade almost every
day on my testing machines. I seldom have problems.
  

Minor point I have made on the list before.  Running dist-upgrade especially on testing and unstable can be VERY dangerous if you are not tracking the development of Debian.  Look through the archives of this list alone to see the number of people that come crying after performing that operation and walk away not liking Debian.  Hans is 100% correct that it does need to be run once in a while to get the "good stuff".  I strongly suggest first running apt-get upgrade then doing an apt-get -u dist-upgrade and see what packages it wants to pull.  Possibly even research and make sure they don't have massive crippling bugs filed against them. ; )

Also, do as Hans says and use sarge instead of testing in your sources list.  This will make for a smoother transition.

-Derek