jmherp Only the derivatives are deleted, not the originals, it's then reprocessed based on the original.
If everything disappeared from the media directory, then something went terribly wrong and you should restore from a backup.
I can't tell you if there is an issue in version 1.7.7 with the reprocessing of media, that version is before my time on this project.
The issue you link to was because they modified the original by overriding the settings in media_processing.conf, therefore it's not really an original anymore and derivatives couldn't safely be created from it.
Have you edited the settings in media_processing.conf from default?