does setting up proper relationships in a database help with anything else other than data integrity?
do they improve or hinder performance?
About impact on performance: In my experience with MS Access 2003, if you have a multi-user application and use Relationships to enforce a lot of referential integrity, you can take a big hit in terms of response time for the end-user.
There are different ways to take care of enforcing referential integrity. I decided to take out some rules in Relationships, build more enforcement into the front-end and live with some loss of RI. Of course in the multi-user environment, you want to be very careful with that bit of liberty.