From my understand if <CollapseVideoFolders> is false all <CollapseSingleItemFolders> are independent of each other so each library can be true or false. But if <CollapseVideoFolders> is true all <CollapseSingleItemFolders> are irrelevant and provides the collapsedview.
In the end all new installs are both set to true. But from a old install standpoint the could means a destructive change.
At some point Devs are going to have to say a clean/new install is require and you can only restore user and userdata to get everyone on the same track. Or attempt to explain why this happened on said update.
Right, so in my case I have CollapseVideoFolders set to "false" which would suggest that all CollapseSingleItemFolders are independent. If I understand you right, the real issue is that one library has no such setting and the default probably changed at some stage which triggers the library rebuild?