After upgrading one workflow activity, the previous workflow still seems OK as showed below.
How ever, when I try to publish the workflow again, the error "Could not deserialize object. The type 'EFSPWFActivities.updateItemsByCAML' could not be resolved." popped up.
I rebooted the whole SharePoint server. But the same problem is still there. Interesting. So I checked "features" folder, web.config file, GAC, workflow action files, SharePoint log, windows log, etc. Everything is OK.
Hours of Googling brought me here. This is something totally new to me. I was surprised that SharePoint designer get (or create) the proxy dll files locally for workflow activities. After deleting all files in "%System Drive%\Documents and Settings\%user%\Local Settings\Application Data\Microsoft\WebSiteCache", then rebooted SharePoint designer, the workflow back to "normal". I got the error below, which is what I expected. So just need to delete that action, and then recreate it.