Backing up - Are PKG files really needed?

Years after getting my things set up, and a drive failure scare, I've finally been putting the effort into backing up my collection.
Problem is, that in the past it seems I deleted all my PKG files after installing them to RPCS3. Including updates, DLC, etc... My PS3 has been buried in a closet for years, so redumping everything over again would be a lot of effort to go through.

Looking through RPCS3's dev_hdd0/game folder, I found that that appears to be where everything was installed to. Logically, if I were to back up these folders, could my games easily be restored again just by placing them back in the same folder location? Where do DLC and Update PKGs get installed to? Do they overwrite game files directly in these folders?

Yes, update and DLC packages can and usually do overwrite files on the main game
If you want to revert update and DLCs, you need to reinstall the base game through the original packages