do i just update this by deleting the old folder and extract a new one
It depends on which download you used previously. If you used the "Windows Installer" version then you should not delete the folder. If you use the "Windows Installer" version again then it will automatically uninstall the previous version before installing the new version. If you do want to only remove the "Windows Installer" version you should do a proper uninstall via
Control Panel > Programs and Features. If you use the other downloads then you can just delete the old version if you like or you can have multiple versions installed simultaneously.
all of the installed libraries will load up from the MyDocuments folder again?
If that's what you have your sketchbook folder configured as then yes. The preferences file is normally stored in a different location from the Arduino IDE installation so the sketchbook folder setting will persist between installations. If not you can just set it via
File > Preferences > Sketchbook location.
i think i have the portable version, although i have not added the 'portable' folder into the main folder....
If you didn't create the portable folder then you're not using the Arduino IDE in portable mode. If you are in portable mode then you will need to know this (from
https://www.arduino.cc/en/Guide/PortableIDE#toc3):
If you want to update a portable installation to a newer version, download the new version in compressed format, then extract the contents in a temporary folder. Now you may either move the "portable" folder you have from the old installation into the new one, or copy all the files of the new version onto the old one, overwriting all the files. Either way you should end up with the updated portable Arduino Software (IDE) installation with your cores, libraries and sketches preserved.
Generally you should never put any of your own sketches, libraries, or hardware packages in the Arduino IDE installation folder as they will be lost when you update to a new version. An external sketchbook folder will not be affected by an upgrade so anything you put then will persist between installations and can be shared between them.
In portable mode there is good reason to put your sketchbook inside the portable folder, but you need to remember to transfer it over when you upgrade, as instructed in the above quote.
and i want to update it because Alt+Tab only works on the 2nd time for some reason?(1.8.3) and it is really annoying when i have to do it twice all the time....
Do you mean when switching between IDE windows? Yes that's extremely annoying but unfortunately it still happens in Arduino IDE 1.8.5, as well as every other version of the Arduino IDE I've ever used. I've never experienced that problem with any other application so I'd think it would be something that could be fixed. I've meant to report that to the Arduino developers. I haven't checked whether it already is on the issue tracker. I've noticed that it doesn't happen when you switch between multiple instances of the Arduino IDE, only between windows loaded from the same instance. So if you do File > Open, File > Examples, or File > Sketchbook the alt+tab bug occurs but if you start arduino.exe multiple times then it does not.