Server-side generation question: LODs vs chunks

Team, I've been following the server-side generation threads and am eager to start testing it in my server. But before doing so, can you please help me understand a few technical details?

Will the server only generate LODs but not actual chunks? I'm asking that because I'm wondering what happens when the server is upgraded and i.e. a new biome (read the Pale Garden) is introduced. If the chunks were generated the upgrade will have no effect. If only the LODs were generated, the new terrain will generated after the upgrade when users visit it and I expect the LODs to eventually update to reflect that too.
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