Does the enablement of the Source Version-Specific with Carry Foward Relationships in Vault work retroactively?
No, the enablement of the Source Version-Specific with Carry Forward Relationships does not work retroactively. It works from the point of enablement forward.
Source Version-Specific with Carry Forward feature allows target documents, that relate to specific source document versions, to carry forward all outbound relationships to the new document version. If this feature is enabled after target documents are added to source document versions, then Vault does not carry forward the target documents during the creation of the new version of the source document.
Vault Relationships Documentation: About Version-Specific Document Relationships