Start working on your 10,000 hours any way you can. That means reading up on material concerning the field, diving in and applying for a job, hacking away at something as a hobby, keeping up with industry developments, paying attention to the thought leaders (eg. Jakob Nielsen, Jared Spool, Steve Krug, etc) and asking lots of questions. So I'd expect to see your reputation here go up quickly!
You don't need to go back to school unless you want to, which you don't, so skip it. Instead, read books, blogs, and attend conferences and events. Leverage your approach to the field from an engineering point of view as an advantage other visual or UX designers don't have: you know how the guts of software works and have a much clearer idea of constraints and limitations introduced into an architecture by technology. This angle can be a much needed ground in reality for many design teams.
Portfolio
A good portfolio for a UI/UX designer consists mostly of stories. You encountered such-and-such problem in such-and-such situation and considered a bunch of different variables in order to offer a certain solution. As you can tell from answers on this site, with UI/UX there can be many possible solutions to a problem, which is different from engineering where there is frequently a solution that was intended by the creator of the ecosystem you're working in.
In this field, however, things are more subjective, and the only way to solve problems is through experience and common sense. The experience part takes time, and common sense is something that gradually evolves from having seen a lot (which you probably have if you've been using the Web for the past 10 years). So you should be on the lookout for great UI/UX and start building an encyclopedia in your head.
Aside from stories, make sure you have a clear idea in your head of what platforms you know. There's a big difference between designing a UI for a Winforms desktop app compared to an iPhone app. If you can demonstrate knowledge in both areas, congrats, you're special.
Employment
It's hard to say what employers look for in "User Experience Designers". Personally I try to stay away from that term as it's so broad (like "software engineer") that it doesn't really specify what you're doing. Instead, try to specialise your knowledge and let that give you a head start. The user experience field is all about overseeing many things and making the best decisions based on carefully assessing different variables (business logic, user needs, technical requirements, etc), which hopefully lead to the best decision for the user.
User research methods are important, so brush up on them but don't obsess too much. Make sure you expose yourself to testing. User testing, usability testing and remote testing are important and you should familiarise yourself with each of them, even if you do it Steve Krug-style.
Hope that helps. You'll get other answers telling you something completely different, and they'll all be as valid as this one, which is typical of the field. (Unless someone comes in and says you should go to school or fry - they just don't know what's up. ;))
