Did you find out more information on the VXLAN support on N7K VPC? It seems involves to get bridge domain and VLANs working on peer-link. I still didn't get the answer how to make bridge domain working on peer-link. The statement you are referring may not suggest VXLAN are not supported on vPC.
As for Physical Port vPCs, see the following for the concept:
Physical Port vPCs
Physical port vPCs are vPCs configured on the physical interface of a vPC peer devices. Physical port vPCs can optionally run Link Aggregation Control Protocol (LACP) to the downstream device. Physical port vPCs are supported on F2 and F2E modules. The vPC configuration is applied directly on the member port. You can also enable LACP protocol on the physical interface configured with vPC. From Cisco NX-OS Release 7.2(0)D1(1), physical port vPCs are supported on F3 and FEX modules as well.
This example shows how to configure Physical Port vPC on F2, F3, and FEX modules: switch# configure terminal switch(config)# interface ethernet 1/1
switch(config-if)# vpc 10 (under physical port directly instead of under the port channel)
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