The install directory is handled similar with the installer whether Don't use %AppData% is checked or unchecked. The main difference is the doLocalConf.xml existence which impacts how notepad++.exe saves to the xml files. When notepad++.exe saves to the install directory, then a risk exists when using the installer to upgrade which can overwrite customized xml files.
Information from install logs:
Files Install Upgrade Minimalist doLocalConf.xml extract extract extract autoCompletion\*.xml extract skip functionList\*.xml extract extract overrideMap.xml extract skip gup.xml extract extract contextMenu.xml extract skip skip tabContextMenu_example.xml extract skip skip toolbarButtonsConf_example.xml extract skip skip toolbarIcons.xml extract skip skip langs.model.xml extract extract extract stylers.model.xml extract extract extract shortcuts.xml extract skip skip nppLogNulContentCorruptionIssue.xml extract skip skip markdown._preinstalled.udl.xml extract extract extract markdown._preinstalled_DM.udl.xml extract extract extract DarkModeDefault.xml extract extract extract themes\*.xml extract extractTheme modifications in the install directory can be overwritten by the upgrade as that is what extract does.
If Don't use %AppData% is checked:
The default Custom type of upgrade install will extract many xml files so to keep customizations, may need to backup before install and merge after install.
The Minimalist type of upgrade install will extract the least amount of xml files so is probably the safest to keep customized xml files.
If Don't use %AppData% is unchecked:
Modified xml files are saved to %AppData% so are safe.