Yes, you need to return it. It is like if you have a defective product when you take it back to a brick and mortar store to exchange it you have to return the defective one to get the new one.
It is a liability (and publicity) issue for Apple if they don't collect them all- lets just say you continue to use it and it does catch fire- not only a publicity issue, but I imagine there is someone out there that would try and sue Apple if that happened. Wouldn't hold up in court I don't imagine since Apple could prove they sent a new battery, etc., but would not be press they would want either way.
Send back the battery- your crotch will thank you!!!