What are the step-by-step instructions to get Spike RISC-V simulator setup for Freedom Studio?

I did the manual install for linux as described here:

Do I actually need to install the entire suite of xPACK tools to get it to work?

To get what exactly to work?
The xPack RISC-V GCC tools are standalone and can work on their own.
But you can also use other stuff such as the Embedded CDT plugins in Eclipse with them.
It really depends on what you’re trying to do.
If you just want to compile RISC-V code then the xPack RISC-V GCC tools will do that.
@ilg has done a great job of creating and documenting these tools so the documentation should answer most of your questions.