does this upgrade the old version?
Not exactly, but if you follow the instructions in the answer you linked you will be using the updated version.
If you want to understand the purpose and function of
man update-alternatives, which begins:
update-alternatives creates, removes, maintains and displays >information about the symbolic links comprising the
Debian alternatives system.
It is possible for several programs fulfilling the same or similar functions to be installed on a single system at
the same time. For example, many systems have several text editors installed at once. This gives choice to the
users of a system, allowing each to use a different editor, if desired, but makes it difficult for a program to make
a good choice for an editor to invoke if the user has not specified a particular preference.
Debian's alternatives system aims to solve this problem. A generic name in the filesystem is shared by all files
providing interchangeable functionality. The alternatives system and the system administrator together determine
which actual file is referenced by this generic name.
Read also about the
--config switches there.
And does it take care of adding java to the global path?
Is /opt/ the usual directory used for a newer version of java?
It is for the Oracle package. The distro IcedTea java is elsewhere.