I don’t think a .directory is necessarily an older way of doing things in dolphin, as e.g. when you right-click → properties → change icon, all it does is create a .directory file in that folder.
Furthermore the dolphin settings mention that it will add system metadata or use .directory, whichever available:
Maybe the “new” way you’re talking about it said “system metadata” but I have not been able to find out what it is or how to manipulate it. (Info would be appreciate here too)
However, on my end, I’ve been trying desperately to add a custom folder icon to a dolphin rclone fuse mount, and have not been successful what so ever. No matter how I manipulate that .directory file it just does not work. As I try to change the icon from the ui, It even creates a .directory → .directory.lock → .directory.lock.rmlock files, alongside ones that are just named random numbers, so I think it’s trying.. something.
I think it might be an actual issue/bug in dolphin.