Yes, you’ll need the CD3.5 plugged in to the mains as well as the Flatcap only powers the analogue output stage of the player.
You can sit the Flatcap on top or underneath, but it’s not ideal placement - you will get better performance with some physical separation such as with each item on it’s own shelf or level.
Years ago I added a Flatcap to my CD3.5 and didn’t feel it added much. That was before I knew about servicing. If it’s not been serviced it needs it . If it has been then enjoy.
I had a CD5 and added a Flatcap 2 to this, the difference was remarkable. As suggested, stacking is not ideal, given that the Flatcap has no moving parts, if you were to do this, I would suggest the CD3.5 on top, you are then at the very least, providing a solid base for the CD mechanism.
If you do stack then put some paper under the feet of the upper unit. The feet “go soft & gooey” after a few years and leave sticky black marks on the unit below; also on the beige coloured carpet in the living room…