If you haven’t messed with/edited the friendly name system files or imported custom background music, I wouldn’t move those to sd2 as they may be updated with new stuff with the new version of the system.
Also themes, don’t move those. Older themes are still compatible, but the way the system handles them changed, so it is better to not move old themes, just use the theme downloader on the device to re-install your themes once you have the new system installed.
If you have made changes in retroarch configs and want to keep them, you will need to save a config backup for it in Configuration>customization>Retroarch Configurations. If Custom Packages is set to sd2 in the storage options from previously, this will be saved on sd2 too.
Then flash the new version of the OS to sd1, and you should be just fine.