No, you don't need to keep "delete before extracting" checked. It's mainly there if you want (or like) to do clean installs of things.
You could look through the changelogs for the DogTag libraries if you like, but I'd just take a look at the dogtag wiki on wowace and the in-game dogtag help.
CowTip uses DogTags also, and is written by the same author. It's basically the PitBull of tooltip mods.
