of course not. Only the kernel will be optimized. So the _kernel_ may be faster (if you ever notice a change) but it won't touch any installed program.
In linux world, you can either compile from source or to use precompiled package (rpm, deb, etc...). Some options exists in compiler to optimize code for newer processor, so when you make a package from a source code, you have to choice to enable, or to do not enable, the optimization. Usually it's a good idea (usually because sometime it is worst) but as I said, older cpu won't be able to use this (or worst : will crash randomly!).
In your case, the guy that make this 686 rpm decided to use optimization and the one that make the 386 one decided to not. That's all.