As far as I can see user preferences are not safed in the installation folder,
but in Documents/My Games/Battlezone II.
That means you can safely reinstall without loosing settings.
Yes, the files are there. Great!
Regarding the patch installs, I see each of them introduce a folder called "addon". The notification I am given in multiplayer join calls upon the latest "addon" folder, while pointing out yet the same patch number for both the adjoiner and the host, 1.3.7 as far as I remember, that is. That casues me to doubt whether the case is the patch itself or maybe only the source folder difference causes the disturbance, which on the other hand would seem rather unlikely?