My experience matches 100% with yours, Andy. I got the same scary message about the apps when working with my wife's computer and her iPhone, and I also backed up before going forward.

And I also ended up with an annoyed wife who had to rearrange all her apps on her phone. I agree, it makes no sense that it wouldn't remember where those apps were before. It makes me wonder what will happen when people cultivate a system of well organized folders and try going through this. I imagine all the folders would be blown out and the apps placed back on the home screens in random order.