When you are culturing viruses on the bacterial culture, why is it so
important to use a hard agar, with a soft agar overlay to demonstrate
plaque formation?

It helps the bacteria to diffuse from one bacterial cell to another
after the lysis of first one. In hard agar plate the phage can not
diffuse easily and it result in restricted mobility. Thus if we use
hard agar there will be limited cell lysis and it won`t result in a
visible plaque formation.