This all raises an interesting question, though. In this case, you were upgraded and then downgraded and your original seats were gone - what if ALL of the economy seats had been assigned during the time the system had temporarily upgraded? Would you be without a seat at all? Would they tear up the boarding passes of a confirmed non-elite customer to give the seat to a Plat or EXP?
I'd be very curious to see how this situation would be handled. I'm not sure what kind of safeguards there should be, but there should be something. Or perhaps once an upgrade seating assignment is made, then don't downgrade under any circumstance.
I have to say that the security screen comment was way out of line! As if the situation is not stressful enough, should airline personnel be using security screenings as a threat? Most certainly not! The rest of your story is unfortunate, but on that point, I would seriously have taken down the name and would write to the airline. That behaviour is completely inappropriate.