Does init actually need to do daemon supervision?
Sure, init has historically done some sort of daemon supervision (or at least starting and stopping them) and I listed it as one of init's jobs. But does it actually need to do this? This is really two questions and thus two answers.
Init itself, PID 1, clearly does not have to be the process that does daemon supervision. We have a clear proof of this in Solaris, where SMF moves daemon supervision to a separate set of processes. SMF is not a good init system but its failures are failures of execution, not of its fundamental design; it does work, it's just annoying.
Whether the init system as a whole needs to do daemon supervision is a much more philosophical question and thus harder to answer. However I believe that on the whole the init system is the right place for this. The pragmatics of why are simple: the init system is responsible for booting and shutting down the system and doing this almost always needs at least some daemons to be started or stopped in addition to more scripted steps like filesystem checks. This means that part of daemon supervision is at least quite tightly entwined with booting, what I called infrastructure daemons when I talked about init's jobs. And since your init system must handle infrastructure daemons it might as well handle all daemons.
(In theory you could define an API for communication between the init system and a separate daemon supervision system in order to handle this. In practice, until this API is generally adopted your init system is tightly coupled with whatever starts and stops infrastructure daemons for it, ie you won't be able to swap one infrastructure daemon supervision system for another and whichever one your init system needs might as well be considered part of the init system itself.)
I feel that the pragmatic argument is also the core of a more philosophical one. There is no clear break between infrastructure daemons and service daemons (and in fact what category a daemon falls into can vary from system to system), which makes it artificial to have two separate daemon supervision systems. If you want to split the job of an init system apart at all, the 'right' split is between the minimal job of PID 1 and the twin jobs of booting the system and supervising daemons.
(This whole thing was inspired by an earlier entry being linked to by this slashdot comment, and then a reply to said comment arguing that the role of init is separate from a daemon manager. As you can see, I don't believe that it is on Unix in practice.)
Sidebar: PID 1 and booting the system
This deserves its own entry to follow all of the threads, but the simple version for now: in a Unix system with (only) standard APIs, the only way to guarantee that a process winds up as PID 1 is for the kernel to start it as such. The easiest way to arrange for this is for said process to be the first process started so that PID 1 is the first unused PID. This naturally leads into PID 1 being responsible for booting the system, because if it wasn't the kernel would have to also start another process to do this (and there would have to be a decision about what the process is called and so on).
This story is increasingly false in modern Unix environments which do various amounts of magic setup before starting the final real init, but there you have it.