Gave it a quick test myself, and it seems to work. Just in case, I set steam to not update hammerfight. Seems to work fine and smooth already, though it might reset mouse DPI settings since the default save file is included.
But yeah, thanks. This is one of the first games I got on steam and it was pretty interesting. It's good to crack it open an get some more gameplay out of it.
To be clear, that file isn't technically your character save file, so you won't lose progress by overwriting. Version .004 of that file is different from Version .005 so although I can't say exactly what it does, I would recommend overwriting it when asked. Your settings for other things are stored in config.ini.
As for what the patch changes, all I know for certain is that it adds Tribal Wars mode. There may be other changes, but I've been unsuccessful in digging up a changelog.
If you're still unable to unlock Tribal Wars after applying this patch, you will need to edit your save file and change a section at the very bottom of the file. The process is
explained here, make sure you pay CLOSE attention to the instructions (notice carefully the position of close/open parenthesis, it can be a bit confusing)