I have a clean install of the latest version of Grav running locally to which I added my existing markdown and image files and my adapted theme. The twig content is rendering fine, but the content from the markdown files is showing in the rendered page as escaped HTML.
The same content and theme is running happily on the hosted version ( Grav v1.6.30 - Admin v1.9.18) of the website.
This feels like a setting somewhere which has gone awry, but I can’t find it . . . .
Well, the documentation can be rather long. The best approach is always to upgrade locally first, then push the changes to production. So you were going about it the right way.