Suggestion: Visit
http://www.ab.com/manuals/dr/Miscellaneous/drives-br007a-en-p.pdf
for SMC and output contactor.

Suggestion: The isolation contactor provides isolation between the motor and power controller. Visit
http://www.ab.com/manuals/ms/0150-811.pdf
p. 2-4

qvo;

Dependant on your local regulations, an IC may not be required.  They do, however, provide many advantages:

1.  True off state isolation.
2.  Dis-connection from the line during non-operation.
3.  Means of fault current breaking on solid state component failure.

As for your second question "why does the enclosure for the SMC have to be bigger then a SMC without a IC", the simple answer is space required.  You will also have additional watts loss from the contactor, but this will be minimal in comparison to the Soft Starter.

Also, the IC should be sized to break the overload current of the motor connected.  This means that the utilisation category must be AC-3.

qvo,
To expand on TheDOG's response, isolation contactors are not typically required, but have distinct advantages as mentioned.  

The True Off State Isolation brought up by TheDOG means that there will be an air-gap between line and load when the unit is off. Some safety protocols require this in all AC motor controls; Ford Motor Co. is one place in particular that has this requirement. SCRs (the switching device in the SMC) are not truly an insulator when off. They are a bi-state SEMI-conductor. Current "leaks" through an SCR when off. Leakage current is very low, on the order of 1-4 microamps. It is detectable as line voltage potential by sensitive meters such as a Fluke digital, however the burden of a jeweled analog meter will drive the output so low that is does not register. The IC is used to prevent this leakage current from showing up on any meters and is considered a safety issue. This point is debateable but it exists.

Disconnecting from the line during non-operation is a good idea if there are a lot of line transients such as lightning or capacitor switching going on in your area. SCRs are susceptable to severe line transient spikes, so the IC can be though of as cheap insurance.

Fault current breaking I think refers to having a device that will take you off-line in the event of having multiple SCRs fail. If this should happen, let's say after a lightning stike, the SCRs will fail ON or "shorted". If you end up with 2 shorted SCRs in opposite phases, there exists a path for current to flow through the motor windings unrestricted, causing heating and eventual failure of the motor. The IC is typically tied to a "shorted SCR dectector" circuit in the soft start. Although the AB SMC does not have a separate circuit for this, you can just tie the Fault contact to the IC so that the IC opens under any fault. The same can be done by having a Shunt Trip in the circuit breaker feeding it.

Hope this helps

Subvert the dominant paradigm... Think first, then act!

Although it is common practice to use solid state starters without an isolation contactor, it is better practice to use such a contactor. A solid state starter employs SCRs to control the current to the motor. When these SCRs are subjected to a sever fault situation, they can fail and if they do, they will fail closed which could cause major damage to the motor, especially if the motor is effectively left connected to two phases only.

The contactor used must be AC3 rated because it carries the starting current to the motor. In some situations where the start duty is very light and the start torque is particularly low, the start current may be less than 300% current in which cases it may be acceptable to use an AC2 rated contactor. (The ACx rating is determined byt the start current required.)

It is preferable to open the contactor when the motor is not running to reduce the voltage transients blocked by the SCRs. This will result in a much reduced potential of SCR failure due to the supply born transients causing an excess voltage across the SCRs.

The contactor is not neede to make the motor and/or starter run, it is an additional safety device givong better isolation in the off state, reducing the potential of the starter and motor being damaged by supply transients and surges.
Note: the leakage current through the SCRs and snubbers in the OFF state can be considerable, many tens of milliamps and in some cases could exceed 100 mA without exceeding any component specifactions. This could be very dangerous for service personell!!

Best regards,

Mark Empson
http://www.lmphotonics.com

Suggestion: The isolation contactor appears to be convenient for troubleshooting too since there is no need to disconnect conductors to measure the motor parameters, when it is off. It may eventually pay for itself handsomely in the long run.

Existing postings noted--for SCR-type control, bypass contactors could be described as having current-isolaton capability.