The upload will not replace any folders. It will override only files which are the same named as the Zenphoto distribution. (We do advise you to remove the old Zenphoto files so you do not have obsolete files left around.)
What we are saying is name them something different from the Zenphoto ones. If we moved the folder we would still have to place the watermark images there, so they would still overwrite any you created with the same names.