You don't have to. We started our testing with VCD 1.0 and production with VCD 1.5 (pre VXLAN) and haven't migrated to VXLAN yet. We have network changes to make (which require switch reboots) and haven't had a chance to complete this yet.
Have you changed your MTU on the physical switches to 1600? If not it will not allow the traffic to pass between the two host servers.
-Eric