A new user directory is only necessary if you do not have Microsoft 365, or other systems that already use Microsoft's user directory in the cloud (Microsoft Entra ID). In that case, you can easily create a new user directory in the cloud
In order for Gemini Connected to know the users in your organisation, the user directory must be connected to the solution. This is done only once, by anyone in your organization (in some cases there may be restrictions set by your company's IT).
When it comes to rights, only read access to basic information for the logged-in user is an absolute requirement. If one wants to be able to select users directly from the user directory in Microsoft Entra ID, then Connected needs extended rights, but this is optional.