Exactly. Explorer edits the registry to point at the new locations of the Library and User folders. That is perhaps why when you point them to a non-default location, it wipes the directories. Some sort of 'sanity check' might be going out of control or even this might be intentionally malicious behavior to do a "I'm gonna punish you!" by someone working for Microsoft with malicious intentions.
Now I know people are going to accuse me of "Having my tin-foil hat on too tight!" but think about it for a second.
What would a malicious state actor trying to steal information not want people doing in Windows or any other OS? Answer: Moving the directories where they put their data or putting it on a separate drive.
The vast majority of my "data" lives on other drives.
I have a whole 250GB SSD, devoted solely to photo work. Those files never ever touch the "Pictures" library.
Having multiple physical drives is very, very common. My system has 6.
Having your Library redirected to a different drive is no different than the default location, and hides nothing from the OS or the user.
I was going to test that redirection issue in the context of the 1809 update. I have a whole separate system for 'testing'.
I had set up the Documents, Pictures, and Music libraries in different locations.
A different folder, a different drive in the same system, a mapped drive letter to a whole different system.
Just to see what happened when this system updated. They pulled that Update before I got the change to try it.