This is probably true. You can't eavesdrop on network traffic in a VPC because you never touch the actual layer 2 network, it's a virtualized network tunneled through the actual physical network, so you will never even see packets that aren't directed to you. I don't think there is a really strong security rationale for requiring SSL between an ELB and one of it's target groups, but from a regulatory standpoint it's probably easier to say "encrypt everything in transit." This is why ELBs don't do certificate validation as well. It's unnecessary and extremely cumbersome to implement well, so if you need to have SSL between the ELB and a host, you can just toss a self-signed cert on the host and be done with it.
Can you see traffic between hosts in the same VPC, even if they wouldn't otherwise have access via security groups?
The scenario I'm imagining is that an attacker manages to gain access to one box in VPC, and from there is able to snoop on (plaintext) traffic between an ELB that does TLS termination and some other box in the VPC that receives the (unencrypted) traffic.
If you encrypt all inter-box traffic, then this attacker still doesn't get to see anything. If not, then the attacker gets to snoop on that traffic.
I'm not sympathetic to lazy arguments like, "if an attacker has compromised one host in your VPC, it's game over". No, it's not. It's really really bad, but you can limit the amount of damage an attacker can do (and the amount of data they can exfiltrate) via defense-in-depth strategies like encrypting traffic between hosts.
You can't snoop on traffic between hosts in the same VPC. Here is a good video explaining why https://www.youtube.com/watch?v=3qln2u1Vr2E&t=1592s. The tl;dr; is that your guest OS (the EC2 instance) is not connected to the physical layer 2 network. The host OS hypervisor is and when it receives a packet from the physical NIC, if that packet is not directed to the guest OS then it won't be passed to it. So the NIC on the guest OS (your EC2 instance) will never even see the packets that are not intended for it. Of course this gets slightly more complicated because AWS added some tools for traffic mirroring. So theoretically someone with the right access could setup a mirror to a host they control in the VPC and sniff the traffic that way. But if someone were able to pull that off then you're likely f'ed either way.
Right, they let you do it now but iirc that is a relatively recent feature that was resisted for a long time. And for good reason I think. The purpose of certificate validation is to verify that the remote machine is who they say they are. But those guarantees are already provided by the VPC protocol. In order to impersonate a target instance you would need to MITM the traffic, which isn't possible in a VPC.
