Unfortunately, yes, it's the same with flax oil capsules. You should bite into one every few weeks to ensure they haven't gone rancid. They should also be stored in the fridge, in an opaque bottle - they are less stable than fish oil.

The oil in the flax seeds is released when they are ground, so to benefit from the omega 3 EFA you do have to grind them. You could eat them whole, grinding them with your teeth, but they are very hard and you wouldnt be able to do a good job of it. By grinding (I use a coffee grinder I bought just for seeds and nuts) you release all that EFA goodness and are better able to digest and absorb the flax. Flax seed, both partially ground and unground are stable and keep well in airtight containers. There's a tonne of information on flaxseed and flaxoil at the Flax Council of Canada - specifically under "Technical Information" in the form of PDF files.

Cheers,
Nat