Yes, it works with your existing world, but not with dungeons that are already generated. So if you go into a building, that's it, that's what the dungeon layout is. If you have not gone into a specific room yet, though, and we change how that room would be populated, then the ROOM would be up to date even though the building layout is not, though. And given that you spend a reasonably short amount of time in any building or room, and constantly move on to new ones, all those would be up to date with whatever the latest version is.
Same deal with regions, settlements, etc, etc.