Will "set up new iPhone" in iTunes wipe my swapped iPhone?
No, it won't erase anything.

Allow me to translate that dialog  to idiomatic English:

"I don't know anything about that iPhone you just plugged in.   You have two choices:

Erase it, and then restore it from the back up (of some previous iOS device)?
 Or
Treat it as a new iPhone that iTunes will now keep track of?"

Does that help?