Does iCloud backup require deleting current data for end-to-end encrypted sync?

It is just the encrypted data where Apple does not have the key to remove the encryption. For example, your photos synced to iCloud will not be affected.

Here is a graph that may help to determine what data is affected depending on where the encryption Key is located. Under Key Storage, if it says Apple, then that data will continue to sync because Apple maintains the key and is protected with your Apple Account Password. If it says Trusted Device, then that is something that was encrypted with the Passcode to the device and Apple does not have the key to sync that data.

iCloud data security overview - Apple Support

Did you recently forget your Passcode and had it reset? If that is the case, the encrypted data from Messages, Health, Passwords, etc will no longer be able to sync with iCloud unless you are able to enter that previous Passcode used to encrypt the data. The only option in the case of not knowing the previous Passcode is to erase that encrypted data in iCloud so your iPhone can continue and sync new data that will be encrypted with your current Passcode.

You are welcome.