Should I setup frontend-only users as CPT or use a plug-in?

If a user needs to login to the system to see his own items than it is just like any other user. Reinventing the front end will not be good enough as you will need to detect when its logged in, therefor you will need to reinvent basically most of the user related API. It is a pointless work which you are most likely to get wrong (because it is complex, regardless of your skill). Just use the wordpress user system.

(not sure why would you need a plugin for that, but this will depend on your specific needs in the context of the site)