Really, there are _very_ few apps which should need to use the mysql root password. phpmyadmin would be one, but that's the only one I can think of.
As to whether the update changed it, I really don't know. I wouldn't think it _should_, but I know at some point a version upgrade changed my password from a 6-character random one (which was chosen by the system when _that_ version was installed) to the current long one.
You're right that the users are separate, but even without the /root/.mysql.conf file, the system root user could still get root access to mysql. As Pitr put it, "root, God, what is difference?"
As to exactly what changes the system makes with this password, I'm frankly not 100% sure. I know the system sometimes has to add or drop databases, and I'm sure it uses the password for that, but I don't know what else.