Yes. Before doing this change, it is better to confirm the approach and
then do all the changes.
1. Does everyone agrees that renaming the existing datatype without
changing the OID?
As I said before, Npgsql for one loads data types by name, not by OID. So this would definitely cause breakage.
For users who actually need the new variable-length type, it seems perfectly reasonable to ask to switch to a new type - after all they're making a change in their system. It would really be preferable to leave the current type alone and create a new one.