Hey @andrew.sosna ,
Happy to clear up the confusion here. A doc update is coming soon that will help explain the flow better.
Per our docs, Zoom has deprecated support for user login through email with the release of Meeting SDK 5.9.0. We recommend that you upgrade to use OAuth as soon as possible.
The SDK App type was originally labeled as Account Level, but did not have any account level API or OAuth features attached to it, it was just the SDK Key and Secret, which is not changing / breaking when clicking update.
The “switch” or update is just the addition of User Level OAuth functionality and scopes to the SDK App type. The SDK Key and Secret has no change and will not break. In the photo below you can see the added OAuth functionality. This allows developers to have a single app type for SDK + OAuth use cases. (The addition of Webhooks are coming soon.)
When you update, it will have User Level OAuth functionality added, but that OAuth functionality, and publishing to the marketplace is completely optional, unless you need to get a ZAK token of an external Zoom user to start their Meeting or Webinar on their behalf.
User Level OAuth is what the update is. Click update, and then you can integrate the OAuth flow if you want to get your Zoom users ZAK tokens. You will need to publish your SDK App to the Marketplace if you want to get external Zoom users ZAK tokens on their behalf.
No, you will need to publish your app to the marketplace if you want to make API requests on an external Zoom users behalf. Reminder, with your SDK Credentials, you can join and Meeting or Webinar, but you can only start a users meeting or webinar if they have completed the OAuth flow and you pass in their ZAK Token to the Meeting SDK.
I don’t see the need to postpone the transition from user/password login directly in the SDK, to OAuth. Hopefully the clarification above helps. 
Feel free to chime in here @jon.zoom , @carson.zoom .
Thanks,
Tommy