Originally Posted by
ec.auction
but if hotel said the "cancelled" reservation still valid.... will I be ok?

I had something similar to this happen, a night was cancelled by someone else, I called the hotel and they reinstated it. It did not show up on the system but was fine. It only showed up on the system after the stay.
That was not a reward night, but a prepaid rate night, but it does indicate this can be the case.
If you are worried call the hotel and confirm the details, possibly ask for email confirmation.