Just tried it on my home dev machine, where I have symlinks in the .codeblocks folder.
It seems that it copies them as is, thus if there are relative symlinks then they are invalid after the copy, absolute symlinks work are not broken.
So everything works as expected.
I have no hard links so I don't know what happens with them.
The way to fix old version compatibility is to create two symlinks:
ln -s ~/.config/codeblocks ~/.codeblocks
mkdir ~/.codeblocks/share
ln -s ~/.local/share/codeblocks ~/.codeblocks/share/codeblocks
p.s. probably the dialog message should be changed to something more formal and to remove the 'I' from it:)