No, you don't lose your in-app purchases. You would lose your presets and any backing tracks you've made. You can backup the presets by tapping and hold them to bring up the menu and choosing "Share". Backing tracks you'll find in the iTunes App File Sharing for iShred LIVE.
Also, if you ever move to a new device or wipe out a device and start over, you simply hit the buy button on each effect you've purchased and then Apple will come back with "You've already purchased this item, would you like to re-download it?" and you get the effect, no new charges.
Let us know if that fixes things. Either way we'll get the update out soon.