I've been running my Ranco controller with no shrink wrap on the sensor for about 18 months with no problem, but I'm going to buy a back-up in case I have any problems. When I called Jehmco to order my controller, they didn't say whether or not is was needed, but they did say that if I was planning on running more than 1,000W, I should get an additional plug.
I have my controller set to 78F and I have the heaters set to 84F. If the controller fails "on", then the internal thermostat on the heaters will shut them down at 84F. It's a nice fail-safe.
In regards to sensor placement, it's best to have the sensor up-flow from the heaters but in the same tank (whether it's the sump or the display tank). I read on a reef keeping site where a guy had the sensor in the display tank and his heaters located in his sump. He had an issue with his pump where water was not circulating for several hours and his sump was near boiling when he finally checked on his tank. Since water was not circulating, the sensor was reading the display tank's temperature and since his heaters were located in the sump, the controller kept trying to raise the temperature. The sump was well over 100F, but his controller was reading the display tank temp so the circuit was left open and the heaters fried his bio in his sump. So it's ideal to have the sensor in the same general area as the heaters, although the sensor should be upstream so it is reading water falling from the display and not giving a false reading from being located too closely to your heaters. Hope that makes sense. Sorry for the long rant.