Should flax seeds be crushed to be a good egg substitute?
Yes, for all practical intents and purposes, for flax eggs to congeal they need to be milled or ground to a powder and slurried with water, then introduced to the dish. After stirring and then letting set you should have a nice gloopy mess if you let it stand for a few minutes. 

I typically use a 1 part milled seed to 2.5 parts water, but typically ranges go from 2-3 parts water. You can use a mortar and pestle or coffee grinder for fast, thorough results.


The exception to this is that you can boil them(this link will teach you how to use them to make hair gel, if you're so inclined). This will cause the soluble fiber (the congealing agent) to dissolve, leaving behind the seed husks. Milled flax seeds don't seem to be any less effective and no more distracting in terms of taste so, unless you're doing up your hair, I just don't see the payoff on boiling them.
Another exceptional means to an exception to this is letting the seeds soak for approximately 6-8 hours. As I recall the person who tried this said it didn't congeal much, and was less sticky than a milled flax egg.