@passcodeunlock, there are couple different custom recovery versions you could try. It's strage that phone stucked in bootloop after installing that .zip but that could be related to that USB connector issues you mentioned later. Anyhow, glad you sorted this out.
In general, it it comes to changing recovery - it's relatively safe and harmless. With Samsung Android based phones, basically every model since S3 (and models around it's release date) comes with separate recovery partition (that's common among all modern Android phones) that you can flash with Odin. No data will be harmed here. For older models, like S2 and first Note, recovery is bundled with kernel so you have to flash both. While it's safe for data, your phone may not boot if kernel doesn't match the firmware (like flashing too old kernel for example) so that's something to check first. Some models, like the one you have are able to either boot or install custom recovery from stock recovery, but that may sometimes require few tries or few versions. It's always wise to check what the script inside the .zip file does. For example, S5360 have a couple custom recoveries available. These can only be run from stock recovery, using a .zip file. None of them works perfectly, only one supports proper adb support on root permissions. It's better with more modern phones. twrp.me and xda-developers are two sites worth checking for recoveries.
From my experience, only US variants (AT&T, Verizon sometimes also T-Mobile) have locked bootloaders and you simply won't be able to flash custom image, but data will be fine. There's also FRP (Factory Reset Protection) introduced in some cheaper phones using Android 5.1 released since last year and Samsung Reactivation Lock (for top models, Like Galaxy S5, S6, S7 and Note). While it's enabled (you can check it's status in bootloader), it'll act as locked bootloader and won't allow you to flash any custom stuff, data will be intact.
Some phones since S4 updated to 5.1 will overwrite custom recovery when booting, data will not be touched. To avoid it, you just uncheck reboot in Odin, flash recovery image then power off the phone (either by pulling the battery or with power button, doesn't matter) and start it in recovery mode on the first try.
For other phones, like any Nexus, LG, HTC, Motorola where you have to unlock bootloader in order to flash custom recovery, unlocking bootloader will wipe the data.
I often use custom recovery method to recover data from phones with broken digitizer or completely broken display for years. Never had any data loss, it's safe if you know what you're doing.
@mobileforensicswales, that looks interesting, will have to that a look out of curiosity what can be done with that.
@passcodeunlock, there are couple different custom recovery versions you could try. It's strange that phone stuck in bootloop after installing that .zip but that could be related to that USB connector issues you mentioned later. Anyhow, glad you sorted this out.
I wasn't able to install the update.zip, as I wrote before, the Vol +/- was working, but I couldn't select the "Update from sdcard" menu with the Power button. Actually I couldn't select none of the menus (the reboot system menu either), so I turned it off by pulling the battery. From there on the phone remained in recovery loop, but after flashing the CSC with Odin in download mode, it booted in normal mode again.
What I don't get is how could I flash CSC with the original bad USB connector n download mode, but the LE couldn't make a physical image with the same USB connector.
I'm also glad that this got sorted out, one of our engineers suggested the USB connector replacement, he soldered it, so even if we didn't bypass the lock, overall we provided the right solution )
You can get the phone into download mode and flash new image to the phone. After that, the password will be removed. Here is a great tutorial on this How to reset screen passcode for samsung
Thanks, but it got solved already )
The device had physical damage, which was preventing normal communication over the USB, after the new USB connector was soldered, the LE was able to bypass the lock and create a physical dump of the device with UFED.