Originally posted by Hatsune Neko Gaming:

already explored mistland areas will stay the same.
Areas you have not discovered will be the new mistlands
there are also mods that can force it to update by covering everything back up again for you to explore and rediscover again.
though be warned, mods can have unexpected issues.

This is actually wrong. I just loaded an existing world and all the mistlands terrain got regenerated, destroying my house and burying it under bedrock.