It's not mandatory that you do anything on the server to upgrade your repository. To take advantage of new features in the FSFS backend going forward, you can run svnadmin upgrade but to get the full benefit for your whole history, you'll need to perform a dump/load cycle.
That said, there is a bug with svnadmin upgrade
in 1.8.0 which results in a crash if you have an unsharded repository. So you may want to wait until 1.8.1, or do the full dump/load.