Yep S1 still exists. Nix does not do destructive updating. When you install or update a package, you'll always be able to revert to the previous state. The best explanation of that process can be found in the original paper:

Nix: A Safe and Policy-Free System for Software Deployment - http://www.st.ewi.tudelft.nl/~dolstra/pubs/nspfssd-lisa2004-...

I really hope nix will become standard practice, it has some significant advantages over existing package managers.