Never mind everyone, I figured it out with a simple expriment.

If you just download the new version and unzip it into your Daggerfall Unity GOG Cut directory, it will overwrite the files needed.

I did that and launched from Galaxy and it shows the new 1.0 version start up screen. I checked my mod list and booted the game and was able to load all my older save files.

I only played a few minutes but did not seem to have any issues except one.

Now when the game loads in there is a brief "studder" effect right after a save game load or an area transition...

Is this normal for the 1.0 version of DU, or is there something wrong with my setup?

Seeing as the GOG Cut now is over two years old and some of the mods pre-packaged into it were out of date within a couple of days of the GOG Cut release, I would expect even more bugs to crop up if you try to update it manually to 1.0.

At this point the creator of DFU strongly recommends users to remove the GoG Cut and do a clean install instead and then mod it themselves.

https://www.dfworkshop.net/migrating-away-from-gog-cut/

You have the mod list. Use it and check Nexus for updates. If there are any, download and install them.
Or wait for GOG to update the GOG Cut.
Or live with the problems.

Just use these game files and get the latest unity version. Unpack both and use unity. Direct unity to the game files. Done.

Add mods and tinker.

Game files here on google drive + "releases" at github to get unity:
https://forums.dfworkshop.net/viewtopic.php?f=5&t=2360&p=27538#p27538

It would be nice if GOG would update this.