no it doesn't, SELinux as-is should take no action when the above command
is run, but SELinux implementing path-based permissions will have to
relabel every file or directory in both trees.
if you are willing to live with the race conditions from the slow
(re)labeling and write the software to scan the entire system to figure
out the right policies (and then use inotify to watch the entire system
for changes and (re)label the appropriate files) and accept that you can't
get any granular security for filesystems that don't nativly support it
you could make SELinux behave like AA.
but why should they be required to? are you saying that the LSM hooks are
not a valid API and should be removed with all future security modules
being based on SELinux?