Can you pm me the SR number?
Only deactivating vFlash in the vmx is not enough, you must completely deactivate it on the hosts itself and then implement the change.
If you are not using Cloud or View and don't care about performance data and folder structures you might as well remove the hosts and then implement the xml change but this involves the mentioned data loss.
The vmx-10 and C# client behaviour is "working as designed" as it is a new feature which is only meant to be available via Web Client, which can get you in some catch 22 situations unfortunately.
You might not get full functionality but in case of a VC down you can still use Workstation to get basic manageability on your VMs back until VC is fully functional again.