Actually, final payment is 90 days before sailing. Yes, people back out. My mother cleared a waitlist when bookings backed out. Upgrades are mysterious. I don't think they make a habit out of upgrading for free since that cheapens it for those that pay for their nicer cabin. When you board, you may have the option of buying an upgrade for half the difference.

However, when there is lots of space, they sometimes do maintenance or close off a whole section of cabins. This was case on our transatlantic.