If it were conducting then it would not be required to be constantly driven over the pulley; the positive charge gained at the bottom could just flow directly to the large sphere.
If the belt is not insulating, any charge on the terminal will just flow back to ground, so you can't build up charge on the terminal and it will not rise in potential. The point of a Van de Graaff generator is to physically move charge against the electrical gradient, and you can't do that if the belt lets it slip away.
Now, you can instead use the Pelletron system from National Electrostatics instead of the original High Voltage Engineering (the company Van de Graaff founded to make accelerators) rubberized belt. The Pelletron system uses chains of 'pellets', where each pellet is a plastic cylinder plated with metal on the circumference. The links are also plastic, so the chain is insulating along them. These suffer less degradation of the charge carrying capacity of the chain. Belts would wear and develop bald spots that wouldn't carry charge, so the terminal voltage would not stay constant.