Ideally, yes, you should take out the sand. Funnily enough, I needed to clean out my tank over the weekend, and emptied the tank, put the fish in large (10 gal.) buckets with lids, and spent the next eight hours shovelling out one substrate and replacing it with another.
However, it is possible to leave the fish in. The danger is mostly from burying fish alive, or at least trapping them in corners against rocks or bogwood. The silty water itself isn't much of a problem (most tropical fish are adapted to rather murky conditions), but clearwater species, like discus, might be annoyed by it. Large amounts of silt can irritate the gill membranes.
Taking all the fish out stresses them, and then you will need to re-adapt them to potentially different water temperature, pH, and hardness if you've replaced all the aquarium water. I tend to think the trade-off worth it, which is why I'd recommended it, not really because it is better for the fish, but because it allows you to empty the tank and then sculpt the substrate at your leisure. There's an art to piling sand, and you don't want to rush it. You need to position rocks and wood carefully if you don't want it all to slip down into a single flat level.
Sandy substrates are so worth the hassle though! Yes, your cories will love you forever!
Cheers,
Neale