The answer from icnivad was so very close to working for me. With one additional step.
From your terminal:
Change to appropriate directory (note, if your Library dir is hidden, in the terminal just type the following: chflags nohidden ~/Library )
1. cd /Users/YOURUSERNAME/Library/Preferences/ByHost
List files so you can see the .GlobalPreferences.XXXX-XXXX-XXXX-XXXX.plist
2. ls -lah
Open that plist file in xcode
3. open -a /Developer/Applications/Xcode.app ".GlobalPreferences.XXXX-XXXX-XXXX-XXXX.plist"
Set value to 1 for the key "com.apple.trackpad.threeFingerVertSwipeGesture"
Save the plist file
Restart machine
THEN
Make sure the "Three finger drag" System Preference is disabled. This seems to take precedence and stop the Xcode gesture from working.