IMO You really should soak all freeze dried food. When freeze dried food is placed in water it expands, you want this to happen before it is digested by the fish. Five to ten minutes soak is good. Honestly I don't think this affects the flavor nor do I think the fish cares.
What he's spiting out is the the part of the krill that is not beneficial ie legs, skin, shell etc... They take it in and spit it out because to them it's still food floating in the tank and their short term memory isn't all that great.