Re-read your post and realized I forgot to answer the question about whether you need to bank for your 2005 trip. It depends on when in 2005 you want to vacation.
Since you have an August use year:
Your 2004 points are good for stays between 8/1/2004 and 7/31/2005.
Your 2005 points are good for stays between 8/1/2005 and 7/31/2006.
Your 2006 points are good for stays between 8/1/2006 and 7/31/2007.
And so forth.
So, when in 2005 is your trip?
If it is between 8/1/2004 and 7/31/2005, you do not need to bank. If your trip will begin 8/1/2005 or later in 2005, then you must bank the 2004 use year points to be able to use them for that trip.
Use year can be one of the trickier concepts to understand. Feel free to ask more questions if you need more info or additional clarification.
Best wishes -