So basically, you will have to add back the folders in case you have used a different password block. But I get it, the statement is confusing, irrespective of the connected issues explaining them.
Since you have all the files & folders already encrypted with the same password, it would ideally still work. So no issues there, reading the explanation & the related issues/PRs.
Ideally you should not lose access to the folders/files already added. However to be safe, if there is a backup option, please use that. Also, if you face any issues, please do raise with the developer(s) on their git, so that they can look into it.
Have added the folders and everything appears fine. In Valv hit +/add folder and add the folders where the valv files are one by one. I used termux/find to get all the folders where some valv files were laying around.
The Changelog was pretty clear but the user experience could be better imho.
In any case do this update only when you have enough time to go through the procedure.