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Before Jan. 1st 2023, Croatia wasn't a member of the Schengen Area and therefore couldn't issue Schengen visas.

On Jan. 1st 2023, Croatia will join the Area and will so switch to issuing Schengen visas on that date

The visa code handbook states :

Bulgaria, Croatia, Cyprus and Romania do not yet implement the Schengen acquis in full. This means that the Visa Code is binding upon them but that until the Schengen acquis is fully implemented these four Member States issue national short-stay visas that are valid only for their own territories.

Will a still valid visa issued by Croatia allow the holder to visit the country?

And/or would it be converted automatically to a full validity Schengen visa, as is hinted by the handbook?

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Yes,

The decision of granting accession to the Schengen Area for Croatia states :

Article 2

National short-stay visas issued by Croatia before 1 January 2023 shall remain valid during their period of validity, for the purpose of transit through the territory of other Member States or intended stays on their territories not exceeding 90 days in any 180-day period, insofar as they have recognised such short-stay visas for those purposes, in accordance with Decision No 565/2014/EU. The conditions set out in that Decision shall apply.

A Croatian-issued short-stay visa will automatically be "converted" to a Schengen visa and be valid for all Schengen members, this doesn't seem to apply to long-stay D visas issues by Croatia

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    D visas are automatically assimilated to residence permits issued by a Schengen member state, exempting the holder from short-stay visa requirements in other member states.
    – xngtng
    Commented Dec 13, 2022 at 10:08

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