You indicated that restoring the library "did the trick" - does that mean you're top level folder name is back to what it was before?
If that is the case, then use the rename option, and adjust the base path in the RMC dialog to point to your new folder name. If you have already renamed it (again?) in Windows Explorer, then yes, use the option to "update database to point to new location".
You did not indicate how many music files you have, but if it is significant (say 10,000 files or more), realize that the process will take several minutes if not up to 1/2 hour. If you browse around MC while it is doing this update, you are likely to see a bunch of duplicate files as it does its job (for both the old and new path/name). I would recommend that after launching either of the commands above to just walk away for an hour and let it do its thing, thus ensuring all updates are fully completed before you use the program again.
There is another option as well...
You could simply delete the MC library (which is metadata only, not the music files themselves). You will of course lose any tags that are not embedded in the files themselves, including album art, so make sure this is something you are okay with if you choose this approach. I personally keep cover art in one folder myself, and that is backed up daily via my general computer backup, so even if I blow away the music files themselves, I will not lose the several thousand high resolution cover art files I have spent thousands of hours accumulating over the last 15 years. It will also delete all playlists, if that is critical to you.
So why do it? The one advantage is it clears all kludge associated with the old library, and allows you to start fresh. If you choose to delete the current MC library, make sure your import folder is set to your new location for the files, and run the import tool - this will automatically generate a new MC library.
And of course, the usual caveat applies - go to: File/Library/Backup Library… Before doing any of what is described above.