mulch versus pine needles
Well, I could be the wrong 'guy' you're asking but I'll give my $.02 anyways ...
Forget the pine needles. That will make the ground SOOOO acidic that only acid-loving 'growth' will survive the soil. If you want to see what can grow under a pine tree, you'll see that NOTHING really does.
As far as nuggets, they're OK. No matter what type of 'covering' you use, the thickness of it will pretty-much determine what grows and lives under it. The thicker the mulch, the more moist it will be under there. The THINNER the mulch, the LESS moist it will be under there.
Now, with regards to bugs and such, yes, as you're well aware the 'bad bugs' can come w/the good ones. I can't say if your 'traps' will work under the conditions you present, so I'd err on the side of caution (and assume your traps WON'T work.) So, what do you do? Well, you have to become a termite in order to understand how they thrive. (Search the WEB about this topic and go from there. I'll spare the 'details' because it involves too much writing. Moving right along ...)
I'm not a big 'fan' of putting mulch and plants and bushes right up against the house/foundation for this type of reason, among others. Vegetation should be placed well AWAY from the house. In doing this, you keep the area BETWEEN the house and vegetation aired out (and dry.) Also, I DON'T put mulch right up against the house. I don't do it because it 'invites' bugs, good and bad, to go all the way UP TO the house, and possibly inside. By keeping the mulch a bit away from the foundation AND by keeping the plants away too, you 'dry out and air out' that 'area' to PREVENT the good and bad bugs from getting to the house. If you want the bugs and such to stay under the mulch, then DON'T set it right up against the foundation. Also, be SURE you have downsloping drainage AWAY from the foundation too. If you don't, this will encourage bugs to 'travel' to where the water goes (which is towards the foundation!) 1/4" per foot is all you need. Then, cover w/mulch.
I suggest you look into the shredded types of mulch, like Liquorish Mulch. It's better but it's a little more expensive. Also, you need to apply it a couple of times a year because it 'mats' down AND biologically 'breaks down' during the summer. That's a natural 'thing' because it adds nutrients to the soil.
I'm sure others will have more to say. My best to ya and hope this helps.
Jay J -Moderator