Is the actual installation folder name relevant? I tried the client today and pointed it to the my gog installation root folder. It found several, but failed to identify Settlers 2 10th An. and Settlers 5 (I may had changed the installation folder name during setup).

Based on my personal experience it seems to be a mixture of both registry reading and folder scanning. So if you installed the games via the installer (i.e. not simply copying and pasting them from another computer) and then point Galaxy to scan the folder in which they are installer then Galaxy should have detected them. Unless they are not yet supported by Galaxy or your installer are too old and didn't came with the Galaxy files.

I did the same yesterday and was also surprise that many games weren't recognized despite all being in what has been GOG default install folder, C:\GOG Games, for a while. I did read somewhere that games installed with older installer might not be recognized, and many games it did not recognize in my case were installed before GOG decided to split muli-games packages.

In my case I simply decided to uninstall the games it did not recognize and reinstall the ones I'm still playing with Galaxy. I was surprised that Galaxy default installation folder in back to windows' programs folder.

I have a question about achievements while I'm here, is there a way to have them recognized retro-actively?

Doesn't it look for galaxy.dll or something similar to that.

Pretty much that. Registry it scans and will add any GOG games to it that are installed which support it. (which is annoying.) You can also set a folder so it installs any new games to that folder/imports games from that folder (not only.). The games might not yet support Galaxy, or might not be updated enough to add support. Make sure to use the latest versions if you want Galaxy to pick them up.

(Note due to the registry scans, any GOG games that support Galaxy that are installed somewhere else will be added to Galaxy automatically.)