Good news: I discovered datepicker format can be set by updated vfb plugin. You can now edit date format in the form design.
Bad news: vfb documentation had not been updated. Instructions tell users to edit functions.php etc... so users spend a HUGE amount of time on something that does not work... duhhhh!
New date format setting within form designer is really nice - thank you! But new feature may not be found by users who built their forms way back with previous version of vfb. Urgently need update of that documentation page please:
http://vfbpro.com/2012/02/23/how-to-customize-the-date-picker/
I'm leaving this post unresolved and hope vfb people will acknowledge request for updating doco page.