The patch can not fix the problem: upstart can't scan the directory (or ignore the overflow, or handle it however it would) because libnih blows up without yielding to upstart. It does not call a NihWatch handler and does not return an error code.
So the first step is to have libnih at least not blow up (which the patch did), ideally notify the user (which the patch didn't). The purpose of the patch was not to fix the issue, it was to fix libnih's broken handling of inotify.
It isn't up to libnih to handle the overflow, but the problem right now is in libnih itself and only libnih can fix that.
 and is twofold: libnih blows up on inotify overflow instead of not blowing up on a relatively normal (if rare) situation, and consequently (and obviously) libnih doesn't provide any way for its caller to handle the overflow.
That would give upstart a way of handling the overflow and other (unknown) potential problems: rescan the config if the config watcher dies (after respawning the watcher).