In Twelfth Night, Fabian is a minor character and has to be included for a reason. What does this minor character add to Act III scene 4?
You are completely right in identifying that Fabian is but a minor character in this play. In this particular scene his main contribution seems to be as sidekick for Sir Toby and Maria as they goad the supposedly "mad" Malvolio and lock him up, and then as Sir Andrew allows Sir Toby to read his challenge. However, there are at least two more aspects that need to be considered.
Personally, I find it very interesting that the character of Fabian allows the character of Feste to remain uninvolved with Malvolio at this stage. Feste is a fascinating character who at times seems opposed to what Sir Toby is trying to achieve and bring about. He does torment Malvolio later on in the play, but only after being coerced by Sir Toby and Maria. The fact that he is absent when Malvolio is taken from the presence of Olivia and locked up is particularly key.
Secondly, although a minor character, Fabian is given one line that could be used as a motto for all of the play:
If this were played upon a stage now, I could condemn it as an improbable fiction.
This line seems to capture the sense in which so much of what happens in this excellent comedy has an element of the unbelievable and the extraordinary about it. There is also intense irony in this throwaway line, because, of course, these events are being played upon a stage.