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The simple one first. For whatever reason, Kobo has decided to use the word "collection" instead of "shelf". They are the same thing and there has been no change in function other than the name used.
I don't know why the books disappeared from the library. It probably means the internal database was corrupted and a new one generated during the upgrade. Unless you have a backup of the database or disk from before, there isn't a way to tell.
As you can see the books are still on the device, they should get added to the library. Try doing a power off and on. There is a good chance the books will be processed into the library. Or simply connecting to the PC and disconnecting will trigger a check for new books. One of the screens you see when you do this is the "processing" screen. This is a black screen that is displayed as the books are processed into the library. It shows a progress bar and percent complete as it does this.
If the books are not added, it usually means there is a problem with one or more of them. If there is an error in a book, it can block the processing of all the others. You need to find it and remove to get the others added.
And what you might want to do before you start is to copy all those epubs from the device to your PC. That way you will still have them in case of something worse going wrong.
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