When top_entity = '<entity>' the behavior is unchanged, (top_library = deflib).

When top_entity = '<top_library>.<entity>':
The top_library is set to <top_library> (the part in front of first dot).
top_entity is the part after first dot.

When top_entity = '.<entity>' (empty in front of first dot):
The top_library is set to library from library = '<library>' in Manifest.py.
top_entity is the part after first dot.

Note: top_entity = sim/syn_top or top_entity

In other places, like makefiles TOP_MODULE is set to sim/syn_top,
don't know if there should be fixed anything there.