Of course almost all VMs I have need connection to outside world. Example internet connection, connection with my desktop computer etc. And to allow this connection only through one host is too dangerous. Example host is down or physical network switch is down. Then I have problems. VMs must connect to outside world only through its own host.
Yes, of course 1600 MTU is between VXLANs in different hosts. But this is whole logical switch concept. There is no point to set up logical switches only in one host. VMs can in this case connect directly with Edge (when its FW edge and VMs can connect with it through portgroup) or with portgroups without logical switches.
btw I dont like Cisco-s at all, I also dont have any Cisco and never becomes until I alive . Cisco is maistream crap, not security brand like Palo or CheckPoint. For L3 and up firewalls I like PaloAlto and Sophos (I have those). For L2 firewalls I like Mikrotik RouterOS (also I have). For L2 managed switches I like Mikrotic SwOS and new RouterOS with switch capability and also TP-Link is enough good.