Basically, you currently have the transmitter and receiver in series and they are directly across the line. DC goes through both the transmitter and the receiver.
DC is only supposed to go through the transmitter with only a small AC current going through the receiver. The subset, big as they were, has an induction coil and a capacitor in them that splits the transmitter and the receiver into two different paths and a isolates the receiver from having direct current across it which can demagnetize the permanent magnet inside the receiver and make it useless.
The subset also both boosted the signal going out so people on the other end would hear you better, and provided antisidetone compensation so that your own room noise and your own voice are not heard so loud in the receiver.
That's what a subset does.
Telephones were developed in the 1870's. The 202 and associated subsets were a product of the 1920's and 1930's. Coils and capacitors were huge by today's standards. The subset was necessary back then, otherwise as cheap as the Bell System was, believe me, they would not have designed phones to have them if they were not necessary!
It was not until the late 1930's that components were small enough so that the entire phone could be placed in one housing. Thus the Western Electric 302. In the 302, they basically moved all the components of a 202 with 2 boxes (The subset + the phone body) into one housing. After the war, even more advances were made to the size of capacitors to even get better compactness.
So, you can do your phone all you want with no subset. There are no subset police out there. Just remember, you will have better performance, it will be more authentic, and you will extend the life of the receiver in your handset by having a subset.
Cheers,